Wolfe Wave Detector [LuxAlgo]

27 Jun

The Wolfe Wave Detector displays occurrences of Wolfe Waves, alongside a target line. A multiple swing detection approach is used to maximize the number of detected waves.

The indicator includes a dashboard with the number of detected waves, as well as the number of reached targets.

🔶 USAGE



The Wolfe Wave pattern is a chart pattern composed of five segments, with the initial segment extremities (points XABCD) forming a channel containing price variations.

After the price reaches point D, we can expect a reversal toward a target line (point E). The target line is obtained by connecting and extending point X -> C.



The script draws the XABCD pattern and a projection of where E might potentially be located.

The projection is derived from the intersection between the target line and a line starting from D, parallel to B-C. From this line, margins are added, left and right, creating a wedge-shaped figure in most cases.

When the price passes the target line, this is highlighted by a dot. The dot and pattern are green by default when the target is above D and red when the target is below D. Colors can be edited in the settings. The dashed target line is colored in the opposite color.

As seen in the above example, the price trend can reverse after reaching the target line.

🔹 Symmetry

Ideally, the Wolfe Wave must have a degree of symmetry; every upward line should have a similar angle to the other upward lines, and the same should be true for the downward lines.

Also, the lines forming the channel should be as parallel as possible.



Users have the option to adjust the tolerance:

• Margin controls the wave symmetry of the pattern
  
• Angle controls the channel symmetry of the pattern
  

It's important to note that in both cases, a lower number will lead to more symmetrical patterns, but they may appear less frequently.

It is also important to note that increasing the Margin can delay validating the pattern. In the meantime, the price could surpass the channel in the opposite direction, invalidating and deleting the otherwise valid pattern.



🔹 Multiple Swings



Users can set a Minimum Swing length (for example 2) and a Maximum Swing length (for example 100) which defines the range of the swing point detection length, higher values for these settings will detect longer-term Wolfe patterns, while a larger range will allow for the detection of a larger number of patterns.

By using multiple swings, it is possible to find smaller next to larger patterns at the same time.



The dashboard shows the number of patterns found and targets reached. When, for example, bullish patterns are disabled in the settings, the dashboard only shows the results of bearish patterns.

🔹 Extend Target Line

The publication includes a setting that allows the Target Line to be extended up to 50 bars further. As seen in the above example, the Target Line can still be reached even after the pattern has been finalized. Once the Target Line is reached, it won't be updated further.



Here is another example of a Target Line being reached later on.

The Target Line acted as a support level, after which where the price changed direction.

🔹 Show Progression



An option is included to show the progression before the pattern is completed. Users can make use of the XABC pattern or visualize where point D should be positioned.

The focus lies on the bar range (between the left and right borders of the grey rectangle). The pattern is considered invalid and deleted when point D is beyond these limits. The height of the rectangle is optional. Ideally, the price should be located between the top and bottom of the rectangle, but it is not mandatory.

Show Progression has three options including:

• Full: Show all lines of XABC plus line C-D and rectangle for the position of point D
• Partial: Show line C-D and rectangle for the position of point D
• None: Only show valid completed patterns
  

The 'Partial' option in the 'Show Progression' feature is designed to help users locate the desired position of point D without the visual clutter caused by the XABC lines. This can be useful for those who prefer a cleaner visual representation of the evolving pattern.

🔶 SETTINGS

🔹 Swing Length

• Minimum: Minimum length used for the swing detection.
  
• Maximum Swing Length: Maximum length used for the swing detection.
  

🔹 Tolerance

• Margin: Influences the symmetry of the pattern; with a higher number allowing for less symmetry.
  
• Angle: Influences the symmetry of the channel; with a higher number allowing for less symmetry.
  

🔹 Style

• Toggle: Bullish/Bearish + colors
  
• Extend Target Line: Extend a maximum of 50 bars or until Target Line is reached
  
• Show Progression: Show pattern progression
  
• Dot Size: The size of the dot when the Target Line is reached
  

🔹 Dashboard

• Show Dashboard: Toggle dashboard which shows the number of found patterns and targets reached.
  
• Location: Location of the dashboard on the chart.
  
• Text Size: Text size.
  

🔹 Calculation

• Calculated Bars: Allows the usage of fewer bars for performance/speed improvement