WaveTrend with Crosses

The WaveTrend with Crosses indicator provides a specialized oscillator designed to identify potential market pivot points through trend momentum analysis and signal line crossovers.

Usage

The Usage section describes how the script can be used to identify trend exhaustion and entry points.

The indicator consists of two main lines: the WaveTrend line (wt1) and a signal line (wt2). Traders typically look for crossovers between these two lines to signal potential shifts in momentum. When wt1 crosses above wt2, it indicates a bullish momentum shift; conversely, when wt1 crosses below wt2, it indicates a bearish momentum shift.

The script includes visual aids to simplify interpretation:

• Crossover Markers: Circles appear on the oscillator lines whenever a cross occurs.
• Bar Highlights: The price bars on the chart change color (aqua for bearish crosses, yellow for bullish crosses) to highlight exactly where the momentum shift triggered.
• Overbought/Oversold Levels: The indicator features horizontal levels at +/- 53 and +/- 60. Readings reaching or exceeding these levels suggest the market is in an overextended state, increasing the probability of a reversal.

Details

The WaveTrend with Crosses is based on the original WaveTrend algorithm by lonestar108, later refined by LazyBear. The core logic utilizes the Typical Price (HLC3) to calculate an Exponential Moving Average (EMA). The script then determines the absolute deviation between the price and this EMA to create a Commodity Index (CI).

The primary oscillator line (wt1) is derived from the EMA of this Commodity Index, while the signal line (wt2) is a 4-period Simple Moving Average of wt1. This dual-layer smoothing helps filter out minor market noise while highlighting significant cyclical movements. The area between the two lines is shaded to visualize the widening or narrowing of momentum.

Settings

• Channel Length: Determines the period used for the initial EMA and the absolute deviation calculations.
• Average Length: Sets the smoothing period for the resulting Commodity Index to create the wt1 line.
• Over Bought Level 1: The primary upper threshold used to identify extreme bullish overextension (default 60).
• Over Bought Level 2: A secondary upper threshold used to identify initial overbought conditions (default 53).
• Over Sold Level 1: The primary lower threshold used to identify extreme bearish overextension (default -60).
• Over Sold Level 2: A secondary lower threshold used to identify initial oversold conditions (default -53).

FAQ

What do the colored circles on the oscillator represent?
The circles indicate a crossover between the WaveTrend line and its signal line, highlighting potential points of trend reversal or continuation.

How do the bar colors relate to the oscillator?
The bar colors are triggered by crossovers. When a bearish cross occurs, the bar is highlighted in aqua; when a bullish cross occurs, the bar is highlighted in yellow, allowing traders to see the signal directly on the price action.

How can I access the WaveTrend with Crosses indicator?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.