Indicator: ElliotWave Oscillator EWO by LazyBear

The Elliott Wave Oscillator (EWO) might be exactly what you’re looking for. I’ve been using this indicator for years, and honestly, it’s one of those tools that just makes sense once you get the hang of it. In the settings window for the indicator, you can adjust all the moving averages as well as configure the type of alerts. If the EWO is both negative and increasing, this is doubly bearish.

• The Elliott Wave Oscillator is fundamentally a trend-following indicator.
• Wave 3 is the point at which you should have identified the pattern and must act.
• It can be applied to any time frame and works just as well in every time frame provided that the correct number of bars are displayed in the chart.
• Delving into its foundations, we appreciate how the oscillator is steeped in the oscillation of investor sentiment—the beating heart of market dynamics.

It is displayed as a histogram divided into two areas – positive and negative. The EWO indicator is developed, based on Elliot wave formations, to measure market momentum and identify trend direction. The realm of trading embraces numerous strategies, yet the discerning traders constantly seek dynamic technical indicators that provide a competitive edge. In the arsenal of such tools lies the Elliott Wave Oscillator (EWO), a profound indicator that brings to light the nuanced patterns that govern market trends. The cTrader Elliott Oscillator is also known as a 5 & 34 Oscillator, this is because it uses a 34-period slow moving average and a fast 5-period moving average indicator. The calculation that is used for the formula is that the fast-moving average is subtracted from the slow-moving average and the result is displayed as a histogram on the chart as shown below.

If price is in an uptrend, and this uptrend has been stronger over the previous 5 candles relative to the previous 35, then EWO will be positive. Conversely, if price is in an uptrend, but this uptrend has been stronger over the previous 35 candles relative to the previous 5, EWO will be negative. It is pretty much the same for downtrends — stronger downtrends over the past 5 candles relative to the past 35 will produce a negative EWO value. A downtrend over the recent 5 candles that has not been as strong as over the past 35 candles will stick to the positive field.

Elliott Wave oscillator

Most traders stick with close prices, and honestly, that’s fine. But sometimes I’ll experiment with high/low prices or even volume-weighted prices to see if I get clearer signals. It’s worth testing different sources on historical data to see what clicks with your trading style. When price makes a new high but the oscillator doesn’t follow suit (or vice versa), you might be looking at a divergence. Similar patterns work with other momentum tools too—if you’re interested in exploring more divergence strategies, this RSI divergence guide covers some solid techniques.

The chart below is a good example of how effective this technique can be in counting Momentum Waves. Founded in 2013, Tradingpedia aims at providing its readers accurate and actual financial news coverage. Our website is focused on major segments in financial markets – stocks, currencies and commodities, and interactive in-depth explanation of key economic events and indicators. In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. While you can use it for free, remember that republishing the code is subject to our House Rules. All content on this site is for informational purposes only and does not constitute financial advice.

Detrended Price Oscillator

• Whether you’re just starting out or you’ve been trading for years, the Elliott Wave Oscillator can be a valuable addition to your toolkit.
• A straightforward interpretation might be to go long when the indicator is positive and go short when the indicator is negative.
• To harness the full potential of the Elliott Wave Sage in these trading strategies, understanding the nuances of wave theory and the corresponding market psychology is imperative.
• Wave 4 usually reverses the oscillator and crosses into the opposite area beyond zero, becoming negative during a bull trend and positive during a bear trend.
• Over this roughly nine month timeframe, we have nine trades – 7 longs and 2 shorts, as marked between the vertical white lines.

The Elliott Wave Oscillator is fundamentally a trend-following indicator.

What is an Elliott Wave Oscillator?

By synthesizing various analytical tools, the EWO’s effectiveness as part of an Elliott Wave Oscillator combination can be vividly seen in the refinement of trade entry signals and trade exit signals. Whether aiming to craft an adept trading strategy or simply enhance market understanding, the EWO indicator serves as a bridge between wave theory and practical application. This wave oscillator indicator, having its roots in principles established over nearly a century ago, today stands as a testament to the intelligent fusion of market psychology and analytical foresight. Let’s explore how this dynamic technical indicator can illuminate the path of market trends, informing trading strategies with precision and insight. Our long criteria – positive EWO, EWO of +0.05 or higher, increasing EWO, and positively sloping 50-period simple moving average – also held throughout. 3- In the GBPJPY M15 chart example, using the MT5 version of the EWO indicator, a sell signal was generated when the histogram turned red, indicating strong bearish momentum.

Trailing Stoploss Reversal Level

Think of the Elliott Wave Oscillator as your market momentum detective. It’s built on Elliott Wave Theory principles, but don’t worry—you don’t need to be a wave counting expert to use it effectively. The indicator simply calculates the difference between two simple moving averages (SMAs), creating a histogram that oscillates above and below zero. Discerning EWO signals is a sophisticated process where traders interpret the convergence and divergence between two moving averages to predict potential market movements. Grasping the meaning behind these signals enables a trader to harness the full potential of oscillator analysis, significantly adding value to both optimized trading and market trend analysis.

With Pineify, you can build complex trading algorithms using a visual editor, access a vast library of pre-built indicators, and seamlessly integrate your creations with TradingView. The platform supports advanced features like backtesting, strategy optimization, and real-time alerts, making it an essential tool for serious traders. It’s helpful in determining where an Elliott wave ends and a new one starts. In other words, determining when the market price movement changes its direction (a reversal point) to form an Elliott wave.

The 5-period SMA, on the other hand, is 20% based on the previous candle’s closing price. If EWO is both positive and increasing, this is a strong bullish trend signal. The near-term trend is bullish and the uptrend is getting stronger. On the other hand, ewo indicator if EWO is both negative and increasing, this is a bearish trend. The near-term trend is bearish and the downtrend is becoming stronger. Integrating the Elliott Wave Oscillator (EWO) with other technical indicators is a crucial aspect of technical analysis integration, enabling traders to gain a comprehensive perspective on market behaviors.

Although the oscillator is not an infallible predictor, it operates as a crucial amplifying tool when deftly integrated with a suite of technical indicators. The ability to discern between impulse and corrective waves within market conditions makes the EWO invaluable, particularly when it comes to augmenting a trader’s tactical acumen. To harness the full potential of the Elliott Wave Sage in these trading strategies, understanding the nuances of wave theory and the corresponding market psychology is imperative. The Elliott Wave Oscillator indicator technically is the difference between a 5-period and 35-period simple moving average (SMA) based on the close of each candlestick. The 35-period SMA is slower to react to price as the previous closing price comprises 2.9% of its value (1/35).

This indicated a bullish breakout and a potential buying opportunity. Traders could wait for a minor pullback before entering a long position to align with the new upward trend. If, however, there is no evident divergence, the suspected wave 5 is probably false and should be regarded as an extended wave 3. In that case, what we believed to be wave 4 is nothing more than a pullback within the larger wave 3. A protracted wave 3 indicates a major price movement in the direction of the trend, which is expected to continue for some time.

Elliott Wave Oscillator with Peak Detection

It strips away the complexity of Elliott Wave Theory and gives you something practical to work with—a visual representation of market momentum that’s easy to read and act on. The percentage option is genuinely useful when you’re trading multiple instruments or switching between timeframes. Trust me, once you get comfortable with these basics, you might want to dive deeper into automated trading strategies to really scale your approach. Pineify is a powerful online platform that simplifies Pine Script development for TradingView users. It provides an intuitive visual editor that allows traders to create, test, and deploy custom indicators and strategies without extensive coding knowledge. Ever wondered how to spot market momentum shifts before everyone else catches on?

cTrader Raghee Wave and GRaB Candles

But on its own that’s not a valid trading system, so strict filtering is necessary. Pairing it with a moving average of longer duration (e.g., 50- or 100-period SMA) and taking trades in the direction of the trend as dictated by that indicator will improve its reliability. In practice, for long entries, EWO should not only be positive, but be getting increasingly more positive. For shorts, EWO should be trending increasingly negative, and the SMA should also be negative.

Once you’ve got the basics down, consider combining the Elliott Wave Oscillator with other momentum indicators. The True Strength Index pairs well with wave analysis, and I’ve had good results layering in volume-based confirmations too. Later, when bullish bars emerged, confirming renewed bullish momentum as the price broke to the upside.