Discussing the article: "Introduction to MQL5 (Part 18): Building Expert Advisors Using Technical Chart Patterns (III) — Introduction to Wolfe Wave Pattern"
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Check out the new article: Introduction to MQL5 (Part 18): Building Expert Advisors Using Technical Chart Patterns (III) — Introduction to Wolfe Wave Pattern.
This article explains the Wolfe Wave pattern in detail, covering both the bearish and bullish variations. It also breaks down the step-by-step logic used to identify valid buy and sell setups based on this advanced chart pattern.
ive distinct price points, each with well-defined structural principles, must be found sequentially in a bearish Wolfe Wave pattern. The pattern must start with wave 1, which must be a swing high. Wave 2 must be placed below Wave 1 because it is a swing low. Wave 3 is then a swing high that surpasses wave 1 and falls inside a predetermined Fibonacci extension range of the price movement between waves 1 and 2. Then, wave 4 is created as a swing low that must stay above wave 2 while being below both waves 3 and 1.
Since wave 5 is a swing high that rises above wave 3 and needs to fall within a specific Fibonacci extension range of the move between waves 3 and 4, it ultimately becomes the most crucial point. Since the completion of wave 5 frequently indicates an overextended bullish push, the market is regarded as ready for a possible reversal to the downside whenever all these requirements are satisfied.
Waves 3 and 4 are to be at least 70% the size of Waves 1 and 2, enhancing reversal accuracy. Three trend lines are crucial for recognizing the Wolfe Wave pattern. To help to better define the pattern's upper structure, the first trend line is drawn from wave 1 to wave 3. The lower border is formed by the second trend line, which joins waves two and four. The pattern is visually framed by the converging structure formed by these two lines. A more strategic function is played by the third trend line, which is drawn from wave 1 to wave 4. It aids in determining wave 5's anticipated trajectory. This last trend line is a crucial reference point for trade entrance, since it frequently indicates a possible reversal when the price hits or approaches it.
Author: Israel Pelumi Abioye