Concept
Wave Trend Oscillator
Wave Trend Oscillator is a Momentum & Oscillators concept. The Library holds 3 implementations, each one a working definition you can pull into Quant.
LazyBear
Top Wave Trend Oscillator indicators
3 total
What is the Wave Trend Oscillator?
The Wave Trend Oscillator is a heavily smoothed momentum oscillator built on the same core as CCI: it measures how far the average price (typically the mean of high, low, and close) sits from an exponential average of itself, scales that distance by an exponential average of its absolute size (keeping the familiar 0.015 factor in the widely circulated construction), then smooths the result with a further exponential average. A short simple average of the oscillator is added as a signal line, so the plot shows two lines, often labeled WT1 and WT2, swinging in smooth waves around zero.
The double smoothing is the point: it turns the jagged CCI-style deviation into legible waves, at the cost of lag. The classic events are signal-line crosses weighted by location: a cross down from above the overbought zone (commonly drawn at 53 and 60 in the popular version, mirrored below zero) or a cross up from beneath the oversold one. The clean look invites overconfidence, so the honest caveats matter: waves that seem obvious in hindsight resolve later than they appear to in real time, and in strong trends the oscillator can stay pinned at an extreme while counter-trend crosses fail repeatedly.
How traders use it
- As the classic extreme-cross trigger: the oscillator crossing below its signal line while both sit above the overbought band, or crossing up from below oversold, with mid-range crosses treated as lower quality and often skipped.
- As a bias read: which side of zero the waves are unfolding on frames the centerline regime, so trend-side signals are preferred while the oscillator holds above or below zero.
- As a divergence canvas: the smoothing makes swing points on the oscillator well defined, so divergence against price is easier to mark than on noisier momentum lines.
- As one layer in confluence stacks: crosses are commonly gated by a higher-timeframe trend filter or paired with volume reads, since the oscillator alone carries no volume or structure information.
Wave Trend Oscillator vs related oscillators
CCI: Shares the deviation-over-scaled-deviation core, including the 0.015 constant, but CCI uses a simple average and mean absolute deviation with no extra smoothing; Wave Trend swaps in exponential averages, smooths twice, and adds a signal line.
Stochastic Oscillator: Also traded through signal-line crosses at extremes, but the stochastic measures where the close sits within the recent high-low range, while Wave Trend measures how far price has strayed from an average.
True Strength Index: Another double-smoothed momentum oscillator with a signal line; TSI double-smooths the raw price change itself, whereas Wave Trend smooths a channel-style deviation from the mean.
Related concepts · Classic single-name oscillators
Concept family
Momentum & Oscillators
91 concepts mapped · 72 in the Library
Wave Trend Oscillator FAQ
Is the Wave Trend Oscillator just a smoothed CCI?
Mechanically it is close. The core ratio, deviation from a mean divided by 0.015 times the average absolute deviation, is CCI's construction. Wave Trend replaces the simple average with exponential ones, smooths the ratio with a further EMA, and adds a short signal average. The behavior differs accordingly: smoother waves, later turns, and fewer but slower signals.
What do WT1 and WT2 mean on a Wave Trend chart?
WT1 is the oscillator itself, the double-smoothed deviation of average price from its exponential mean. WT2 is simply a short moving average of WT1, commonly a 4-bar simple average, acting as the signal line. Crosses between the two, especially beyond the overbought and oversold bands, are the events most systems built on it watch.
Does the Wave Trend Oscillator work in trending markets?
Its extreme-fade logic is a mean-reversion read, so it behaves best when price actually oscillates. In a strong trend the oscillator can hold overbought or oversold for long stretches while counter-trend crosses fail one after another. Trend-side signals, such as crosses taken in the direction of a higher-timeframe filter, tend to hold up better in that environment than fading every extreme.
Build Wave Trend Oscillator your way.
Quant writes, tests, and refines it with you — then it runs on LuxAlgo charting or ports to TradingView.