Wave Trend With Signals

The Wave Trend With Signals indicator provides a comprehensive oscillator-based toolkit for identifying trend exhaustion and potential reversals using wave theory, momentum histogram analysis, and automated divergence detection.

Usage

The tool is primarily used to identify overbought and oversold conditions in the market. It consists of two main oscillator lines (WT1 and WT2) and a center histogram (WT3).

• Overbought/Oversold: Look for the oscillator lines to enter the designated levels (defaulted at +/- 53 and +/- 60).
• Signal Crosses: The script plots "X" marks when the two oscillator lines cross within extreme zones. A green cross below the oversold level suggests a bullish reversal, while a red cross above the overbought level suggests a bearish reversal.
• Histogram Momentum: The color-coded histogram indicates the strength and direction of the momentum difference between the two oscillator lines.
• Divergences: The script automatically identifies and labels both regular and hidden divergences between price action and the oscillator components.

Details

This script is based on the classic WaveTrend Oscillator logic originally popularized by LazyBear, which uses the relationship between price (HLC3) and its Exponential Moving Average (EMA) normalized by mean deviation.

Key enhancements include:

• Laguerre Smoothing: An optional smoothing technique that uses a gamma coefficient to reduce noise without introducing significant lag.
• Divergence Logic: The system scans for pivot highs and lows within a user-defined lookback range to detect discrepancies between price and the oscillator, signal line, or histogram.
• Visual Refinement: Modernized color schemes and signal marks for better readability during live trading.

Settings

Wave Trend Settings

• Channel Length: Controls the period used for the initial EMA and deviation calculations.
• Average Length: Determines the smoothing period for the primary oscillator line.
• Over Bought/Sold Levels: Customizable horizontal levels (1 and 2) to define extreme market conditions.
• Apply Laguerre Smoothing: Toggles the use of the Laguerre filter on the output.
• Laguerre Gamma: Adjusts the intensity of the Laguerre smoothing.

Divergences

• Show Divergences: Enables or disables divergence detection.
• Source: Choose which component (Wave Trend, Signal, or Histogram) is used to calculate divergences.
• Pivot Lookback Right/Left: Sets the number of bars required to confirm a pivot point.
• Max/Min Lookback Range: Defines the window of bars the script looks through to find a previous pivot for comparison.
• Plotting Toggles: Individual settings to enable or disable Regular Bullish, Hidden Bullish, Regular Bearish, and Hidden Bearish signals.

FAQ

How do I use the Wave Trend With Signals indicator?

The indicator is used to find market turning points. Traders typically look for the oscillator to reach overbought/oversold levels followed by a signal cross and/or a divergence confirmation.

Can I set alerts for these signals?

Yes, the script includes built-in alert conditions for bullish/bearish crosses and detected divergences, which can be configured through the TradingView Alert menu.

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.