Elliott Wave 3 Finder

The Elliott Wave 3 Finder indicator is a technical analysis tool designed to identify the potential location and duration of the third wave within Elliott Wave Theory cycles by highlighting extremes in momentum.

Usage

The Elliott Wave 3 Finder identifies potential Wave 3 locations by analyzing momentum differentials. In Elliott Wave Theory, Wave 3 is typically the strongest and longest move in a sequence. This indicator uses a momentum histogram (calculated from the difference between two EMAs) to detect these surges.

When the momentum reaches a new high or low over a user-defined lookback period, the background of the chart is highlighted:

• Green Highlights: Suggest a potential Wave 3 in an impulsive uptrend when momentum hits a new high.
• Red Highlights: Suggest a potential Wave 3 in an impulsive downtrend when momentum hits a new low.

Users can monitor these highlighted zones to determine the strength of a trend. The point at which the background stops being painted often indicates that the momentum extreme has passed, potentially signaling the end of Wave 3 and the beginning of a corrective Wave 4.

Details

The indicator calculates a "math difference" based on the subtraction of a 35-period EMA from a 5-period EMA, similar to the calculations used in an Elliott Wave Oscillator (EWO). It then compares the current difference against the highest high or lowest low of that difference over a specified number of bars.

By identifying where momentum is at its absolute peak relative to the recent past, the script highlights the "acceleration" phase characteristic of a third wave. The script also includes built-in alert functionality that triggers when these momentum extremes are first reached.

Settings

• Consider how many bars?: Determines the lookback period (n) used to calculate the highest highs and lowest lows of the momentum oscillator. A higher value requires more significant momentum to trigger a highlight, while a lower value makes the indicator more sensitive to local extremes.

FAQ

How do I use the Elliott Wave 3 Finder?

You can use it to identify the most aggressive part of a trend. When the background highlights, it suggests the market is in a strong impulsive phase (Wave 3). Traders often look for the cessation of these highlights as a sign to tighten stops or prepare for a correction.

What do the colors on the histogram represent?

The histogram colors represent the current slope of momentum. Green bars indicate positive momentum (5 EMA > 35 EMA), while red bars indicate negative momentum (5 EMA < 35 EMA). The background highlights specifically mark when that momentum is reaching a new peak over the lookback period.

How can I access this indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.