Concept

Wave Trend Oscillator

Wave Trend Oscillator is a Momentum & Oscillators concept. The Library holds 1 implementation — a working definition you can pull into Quant.

LazyBear

Top Wave Trend Oscillator indicator

The top custom implementation, built on the original standard Wave Trend Oscillator formula.

1 total

The Wave Trend Oscillator implementation below can become a backtested trading strategy, built in plain English with no code.

Wave Trend Oscillator preview

Wave Trend Oscillator

Indicator

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.

The construction most people run descends from a script that circulated on TradingView through LazyBear's widely copied port, with a channel length near 10 and an averaging length near 21, and it has been folded into countless derivative tools since, from lonestar108's WaveTrend with Crosses to combinations with trend filters and several commercial crypto packages that repackage the same math under new branding. Settings and band placements drift between ports, so the numbers on one chart do not automatically transfer to another, but the wave shape and the cross logic are recognizably the same everywhere.

Two properties define its practical range. First, the bands are conventions, not boundaries: the oscillator is normalized by average deviation rather than hard-bounded, so 53 and 60 mark historically unusual stretch in the popular construction, and the equivalent levels differ across volatile and quiet instruments. Second, everything it knows comes from smoothed price, so it carries no volume, no structure, and no timeframe context of its own; the smoothing that makes its waves readable also guarantees the turn is partly over before the cross prints. It works best as a timing layer inside a framework that supplies those missing pieces.

How to identify Wave Trend signals on charts

The indicator plots two smooth lines around zero with overbought and oversold bands. The quality of a cross depends almost entirely on where it happens.

  1. 1Plot WT1 and WT2 with the standard bands (53 and 60, mirrored negative, in the common port) and check how your market's history actually respects them before trusting the defaults.
  2. 2Note which side of zero the waves are unfolding on: sustained positive waves frame a bullish regime, sustained negative waves a bearish one.
  3. 3Mark crosses at the extremes: WT1 crossing below WT2 with both above the overbought band, or crossing above with both beneath the oversold band, are the canonical events.
  4. 4Skip or downgrade mid-range crosses: between the bands the lines cross frequently and the fills are poorest, which is where most of the tool's whipsaw lives.
  5. 5Check the wave peaks against price for divergence, including hidden divergence at pullbacks within trends, and require agreement from structure or a higher-timeframe read before acting on any single cross.

How it's calculated

A smoothed oscillator measuring how far the average price has stretched from its own exponential baseline.

AP⁡t=Ht+Lt+Ct3\operatorname{AP}_t = \frac{H_t + L_t + C_t}{3}
ESA⁡t=EMA⁡(AP⁡,n1)\operatorname{ESA}_t = \operatorname{EMA}(\operatorname{AP}, n_1)
Dt=EMA⁡(∣AP⁡−ESA⁡∣,n1)D_t = \operatorname{EMA}(\lvert \operatorname{AP} - \operatorname{ESA} \rvert, n_1)
CI⁡t=AP⁡t−ESA⁡t0.015×Dt\operatorname{CI}_t = \frac{\operatorname{AP}_t - \operatorname{ESA}_t}{0.015 \times D_t}
WT1⁡t=EMA⁡(CI⁡,n2)\operatorname{WT1}_t = \operatorname{EMA}(\operatorname{CI}, n_2)
WT2⁡t=SMA⁡(WT1⁡,4)\operatorname{WT2}_t = \operatorname{SMA}(\operatorname{WT1}, 4)
H_t: high of bar t
L_t: low of bar t
C_t: close of bar t
t: bar index of the current bar
AP_t: average price (HLC3) at bar t
EMA(x, n): exponential moving average of series x over n bars
SMA(x, n): simple moving average of series x over n bars
n1: channel length (commonly 10)
n2: average length (commonly 21)
ESA_t: EMA of the average price
D_t: EMA of the absolute deviation of AP from ESA
CI_t: scaled deviation at bar t
WT1_t: WaveTrend line at bar t
WT2_t: signal line, a 4-bar SMA of WT1

Popularized by LazyBear's open-source WaveTrend script on TradingView; the 0.015 scale factor follows the CCI convention.

Crosses of WT1 and WT2 are the usual trigger, with overbought and oversold bands commonly at 60 and 53 above and below zero.

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.
  • As a relative overbought/oversold map: the bands mark stretch relative to the instrument's own smoothed deviation history, so band touches locate candidates for exhaustion while the cross supplies the actual timing.

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.

Concept family

Momentum & Oscillators

91 concepts mapped · 91 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.

What are the standard Wave Trend settings?

The widely circulated port uses a channel length near 10, an averaging length near 21, a 4-bar signal average, and bands at 53 and 60 mirrored below zero. Derivative tools shift any or all of these, and the right band placement genuinely differs between quiet and volatile instruments, so check the levels against your own market's history rather than inheriting them.

Is Wave Trend better than RSI or the stochastic?

It is slower and smoother, not better. RSI and the stochastic react faster and suit tighter timing; Wave Trend suppresses more noise and produces fewer, later, cleaner-looking events. Which profile wins depends on the strategy's holding period and how the signals are filtered. Many stacks use a fast oscillator for entries inside a Wave Trend regime read.

Does the Wave Trend Oscillator repaint?

The standard construction does not repaint closed bars: once a bar closes, its value is fixed. The live bar's reading moves until the close, so a cross can appear and vanish intrabar, and versions that reference higher-timeframe values can redraw until that higher timeframe closes. Judging crosses on closed bars only removes most of the surprise.

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