PZ Wolfe Waves

Wolfe Waves represent a fight towards an equilibrium price and are one of the most reliable predictive reversal patterns in existence. These waves can manifest having different amplitudes and are difficult to spot. This indicator is especially accurate because it waits for a breakout in the wave direction before signaling the trade, resulting in a very high winning ratio.

• Amazingly easy to trade
• Detect all wolfe waves present in the chart
• Trade reliable price reversals in all timeframes
• It is a cutting-edge tool for experienced traders
• Choose your wave amplitude and colors
• It implements email/sound/push alerts
• The indicator is non-repainting*

Definition of Wolve Wave

It is a naturally occurring trading pattern present in all financial markets. The pattern is composed of five waves showing supply and demand and a fight towards an equilibrium price. These patterns can develop over short- and long-term time frames such as minutes or weeks and are used to predict where a price is heading and when it will get there.

Anatomy of a Wolve Wave

If identified correctly, Wolfe waves can be used to accurately predict the scope (equilibrium price) of the underlying security and to anticipate price reversals which are likely to cause big price movements. To identify Wolfe waves, they must have the following characteristics. (Click here to see an example)

• Waves 3-4 must stay within the channel created by 1-2
• Wave 1-2 equals waves 3-4
• Wave 4 is within the channel created by waves 1-2
• There is regular time between all waves
• Wave 5 exceeds trendline created by waves 1 and 3

Settings

When loading the indicator to any chart, you will be presented with a set of options as input parameters. Don't despair if you think they are too many, because parameters are grouped into self-explanatory blocks. This is what each block of parameters does.

• Amplitude
  The indicator is constantly looking for tops and bottoms. The amplitude is the minimal amount of bars where there will not be two tops or two bottoms. Increase the period to see bigger waves or for intraday trading. You can also have several indicators loaded on the chart with different amplitudes.
  
• StrictWaves
  The strict definition of a Wolfe-Wave decreases the density of trading signals but does not improve its performance. Enable this parameter to only trade strict and purist Wolfe Wave. Disabling it causes the indicator to look for looser waves, which increases the trading frequency.
  
• MaxHistoryBars
  This parameter controls how many past bars are examined to increase the indicator's performance and minimize memory usage.
  
• Labels
  Display, hide and/or customize the colors and size of the point labels.
  
• Breakouts
  This indicator implements a especial filter which delays the trading signal until a breakout has taken place in the wave direction. This is especially useful to avoid trading while the Wolfe Wave expands its last leg. Increase the DonchianPeriod parameter to trade Wolfe Waves more safely and avoid repainting of signals.
  
• Alerts
  

  Enable display/email/push/sound alerts for breakouts.

Some Nitty-Gritty Details

• The indicator is evaluated every bar, not every tick.
• The last point of the Wave repaints as the pattern expands.
• You can have several indicators on the chart with different amplitudes.
• An alert is displayed when the pattern forms and also when the wave+price breakout takes place.
• A small percentage of trading signals can repaint (Increase the DonchianBreakout parameter for intraday trading).
• Wolfe Waves can be confirmed with oscillator divergences or Bollinger Bands, for example.
• Target Lines can be optionally displayed

Developers

In order to build an expert advisor, you can read data from the indicator using the iCustom() function as exemplified below.

//---- Step 1: Define constants in your EA
#define OP_BUY_WW    2
#define OP_SELL_WW   3

//---- Step 2: Read value from data buffer
int start()
{
   // Read value from data buffer
   double value  = iCustom(Symbol(), Period(), "Market\\pz-wolfe-waves", 2, 1);
   
   // Do something
   if(value == OP_BUY)      { /* Your code for bullish signal (blue arrow) */ }
   if(value == OP_SELL)     { /* Your code for bearish signal (red arrow) */ }
   if(value == OP_BUY_WW)   { /* Your code for bullish wolfe wave (before arrow) */ }
   if(value == OP_SELL_WW)  { /* Your code for bearish wolfe wave (before arrow) */ }
   if(value == EMPTY_VALUE) { /* Your code if no pattern or breakout */}
   
   // Exit
   return(0);
}

Author

Arturo López Pérez, private investor and speculator, software engineer and founder of Point Zero Trading Solutions.