A double zig-zag structure is similar with the simple zig-zag, with the difference that we are having here two zig-zag patterns than are connected with an x wave and this pattern, the double zig-zag, is corrective in nature.
It is worth mentioning that double zig-zags are not common, however, on the currency markets they are still to be met especially on the second wave types. Double zig-zags are being labeled w-x-y, with the w wave being formed by the first zig-zag, the x wave is the connective wave, basically a wave that corrects the first zig-zag pattern, and then the y wave is the second zig-zag.
In a double zig-zag there are a set of things/rules to be considered:
- wave w must be a zig-zag;
- wave c of W cannot be a failure;
- wave x can be any corrective patter except an expanding triangle;
- wave x must be smaller by wave w by price;
- wave x must retrace at least 20% of wave w by price;
- wave y must be a zig-zag
- wave y must be greater than or equal to wave x by price;
- wave c of y cannot be a failure.
The recordings that will come with this sub chapter will deal with a classical example of a zig-zag and will probe the rules above. Keep in mind that double zig-zags are tricky as when traders are looking for price to retrace in the form of a second wave for example, and if the fist zig-zag is already in the 50%-61.8% area, then everybody will try to jump on the trade for the third wave, placing stops usually right below the end of the c wave of the first abc. Well, under a double zig-zag scenario, those lows are usually going to be taken so you should always take this scenario into consideration when looking at a possible correction like a zig-zag.