Elliot Wave - Impulse

The Elliot Wave - Impulse tool identifies the initial phases of an Elliott Wave impulse pattern to project potential price targets for the third wave. By automatically detecting Waves 1 and 2 based on specific Fibonacci retracement ratios, the indicator provides traders with entry, stop-loss, and multiple target levels for trend-following opportunities.

Usage

The indicator utilizes a ZigZag algorithm to identify price pivots. Once a significant pivot (Wave 0 to Wave 1) is established and a subsequent retracement (Wave 2) occurs within the predefined Fibonacci zones, the tool calculates entry and target levels.

• Wave 2 Identification: The tool looks for a retracement of Wave 1 at ratios of 50%, 61.8%, 76.4%, or 85.4%.
• Target Projection: Once Wave 2 is confirmed, targets for Wave 3 are projected at 161.8%, 200%, 261.8%, and 323.6% of the Wave 1-2 price action.
• Trade Execution: An entry level is set after the price reverses by a specified percentage (default 30%) from the Wave 2 pivot, ensuring momentum is moving in the direction of the expected impulse.

Details

The script is built upon Elliott Wave Theory, specifically focusing on the relationship between Waves 1, 2, and 3. It incorporates an "Error Percent" buffer, as market movements rarely hit exact Fibonacci levels. The ZigZag component filters out noise, allowing the script to focus on significant structural changes. Users can choose to enforce trend direction (Wave 1 making a higher high for bullish setups) or focus strictly on the mathematical ratios between pivots.

Settings

ZigZag Settings

• Source: The price data used for pivot calculations (default is Close).
• ZigZag Length: Determines the sensitivity of the pivot detection. Higher values find larger cycles; lower values find smaller, shorter-term patterns.
• ZigZag Width/Style: Aesthetic controls for the lines drawn on the chart.

Pattern Detection Settings

• Error Percent: The allowable margin of error for the Fibonacci retracement ratios.
• Entry Percent: The percentage of price reversal from the Wave 2 peak required to trigger an entry signal.
• Ignore Trend Direction: When disabled, the script requires Wave 1 to form a higher high (for bullish) or lower low (for bearish). When enabled, it only checks the ratio between Wave 1 and Wave 2.
• Handle Duplicates: Manages how the script behaves when Wave 2 extends or creates multiple entry crossovers.

FAQ

How do I interpret the targets?

The targets (1 through 4) represent standard Elliott Wave extensions for a third wave. Target 1 (161.8%) is often considered the minimum expectation for a healthy impulse wave.

Can this be used on any timeframe?

Yes, the Elliot Wave - Impulse tool is designed to work on any timeframe, provided the "ZigZag Length" is adjusted to suit the volatility and noise level of that specific period.

How can I access this tool?

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