Skip to content 
If price is in an uptrend, and this uptrend has been stronger over the previous 5 candles relative to the previous 35, then EWO will be positive. Conversely, if price is in an uptrend, but this uptrend has been stronger over the previous 35 candles relative to the previous 5, EWO will be negative. It is pretty much the same for downtrends — stronger downtrends over the past 5 candles relative to the past 35 will produce a negative EWO value. A downtrend over the recent 5 candles that has not been as strong as over the past 35 candles will stick to the positive field.
Additionally, instead of a mere positive value for the EWO, we can also better improve its reliability by ensuring that for long trades, its value is sufficiently positive by a specific magnitude. For short trades, we can institute a rule where the EWO is negative by a certain amount. This helps in consolidating markets where frequent moves above and below the indicator’s zero line can give multiple weak signals. A 5-period moving average is much more responsive to price than a 35-period moving average. The 35-period moving average is slower to react to price as the previous closing price comprises just 2.9% of its value (1/35). The 5-period moving average, on the other hand, is based on 20% of the previous candle’s closing price.
Although the oscillator is not an infallible predictor, it operates as a crucial amplifying tool when deftly integrated with a suite of technical indicators. The ability to discern between impulse and corrective waves within market conditions makes the EWO invaluable, particularly when it comes to augmenting a trader’s tactical acumen. To harness the full potential of the Elliott Wave Sage in these trading strategies, understanding the nuances of wave theory and the corresponding market psychology is imperative. The Elliott Wave Oscillator indicator technically is the difference between a 5-period and 35-period simple moving average (SMA) based on the close of each candlestick. The 35-period SMA is slower to react to price as the previous closing price comprises 2.9% of its value (1/35).
Trading the Pivot Points
- The 35-period SMA is slower to react to price as the previous closing price comprises 2.9% of its value (1/35).
- It’s helpful in determining where an Elliott wave ends and a new one starts.
- I remember when I first tried to add custom indicators—it felt overwhelming.
The end of wave 2 is logically followed by the beginning of wave ewo indicator 3. As mentioned above, the most important aspect of trading with this indicator is remembering that its highest and lowest readings identify a bullish or bearish wave 3 of the swing. Wave 2, which, as we know, is a correction to wave 1, typically does not reach a new extreme in the counter-trend direction (e.g., a swing low in an uptrend) but retraces a considerable portion of wave 1. As you know, wave 4 is the other corrective wave during the with-trend momentum, so a second major correction in the Elliott Wave Oscillator will most likely be wave 4. The Elliott Wave Oscillator has a strong correlation with Elliott wave patterns, and its highest readings typically show where the third wave appears on the chart. The EWO can be applied to any time frame and will work equally well if the sample size is large enough.
You can join a Telegram community and chat with other traders to discuss, share and ask for help. You do not have to use the SMA default settings of 50, 100 and 200, we use the settings below to simply use this indicator to tell us if we should buy or sell. The cTrader Elliott Oscillator works best when the chart has the right number of bars displayed this is usually between 100 to 150. Bill Williams suggests around 100 to 140 bars and Tom Joseph mentions that about 150 is a good number. We can also use the EWO on multiple charting timeframes, from the 1-minute time compression all the way up to the monthly (or higher if such a setting exists on your charting software). For shorts, this means a negative EWO value of a certain magnitude, a decreasing EWO value, and a negatively sloped SMA.
Positive EWO value
By synthesizing various analytical tools, the EWO’s effectiveness as part of an Elliott Wave Oscillator combination can be vividly seen in the refinement of trade entry signals and trade exit signals. Whether aiming to craft an adept trading strategy or simply enhance market understanding, the EWO indicator serves as a bridge between wave theory and practical application. This wave oscillator indicator, having its roots in principles established over nearly a century ago, today stands as a testament to the intelligent fusion of market psychology and analytical foresight. Let’s explore how this dynamic technical indicator can illuminate the path of market trends, informing trading strategies with precision and insight. Our long criteria – positive EWO, EWO of +0.05 or higher, increasing EWO, and positively sloping 50-period simple moving average – also held throughout. 3- In the GBPJPY M15 chart example, using the MT5 version of the EWO indicator, a sell signal was generated when the histogram turned red, indicating strong bearish momentum.
How to Add the Elliott Wave Oscillator to Your TradingView Charts
With Pineify, you can build complex trading algorithms using a visual editor, access a vast library of pre-built indicators, and seamlessly integrate your creations with TradingView. The platform supports advanced features like backtesting, strategy optimization, and real-time alerts, making it an essential tool for serious traders. It’s helpful in determining where an Elliott wave ends and a new one starts. In other words, determining when the market price movement changes its direction (a reversal point) to form an Elliott wave.
The key is to learn how to identify waves correctly is a task that is also highly subjective. This was followed by a bullish reversal, indicated by the histogram forming higher lows while the price made lower lows, a classic bullish divergence. This was followed by a bearish reversal, indicated by the histogram forming lower highs while the price made higher highs, a classic bearish divergence. Renowned for his innovative approach to financial markets, Ralph Nelson Elliott laid the groundwork for what would evolve into the highly esteemed EWO conclusion.
The Best Brokers For Elliott Wave Oscillator Analysis
The real value comes from understanding what the indicator is telling you about market momentum and using that information as one piece of your trading puzzle. Test it thoroughly, start small, and always remember that the market can stay irrational longer than you can stay solvent. But here’s the thing—and I can’t stress this enough—don’t trade it in isolation. I’ve seen too many traders get excited about one indicator and forget about the bigger picture. The Elliott Wave Oscillator works best when you combine it with other tools like support and resistance levels, volume analysis, and solid risk management. You’re basically looking at the difference between two moving averages presented as a colorful histogram.
- The end of wave 2 is logically followed by the beginning of wave 3.
- As you know, wave 4 is the other corrective wave during the with-trend momentum, so a second major correction in the Elliott Wave Oscillator will most likely be wave 4.
- The Elliott Wave Oscillator indicator technically is the difference between a 5-period and 35-period simple moving average (SMA) based on the close of each candlestick.
Delving into its foundations, we appreciate how the oscillator is steeped in the oscillation of investor sentiment—the beating heart of market dynamics. It’s this unique synthesis of technical analysis with deep psychological patterns that sets the EWO apart, providing a sophisticated compass for navigating the seas of market volatility. It is more common for the EWO, and other moving average crossover indicators, to be used to confirm trade ideas generated from the price chart. If trade ideas are signaled by the EWO, they should be rigorously filtered with other tools. The EWO on its own will produce a ton of signals due to the natural frequency of 5-SMA and 35-SMA crossovers.
We can either look at its value – positive or negative – or we can look at its rate of change. It’s not rocket science, but there are some nuances that make all the difference. First, make sure you have the cTrader trading platform installed and then simply unzip the file and double-click on it to automatically install onto the platform. TradingPedia.com will not be held liable for the loss of money or any damage caused from relying on the information on this site.
But on its own that’s not a valid trading system, so strict filtering is necessary. Pairing it with a moving average of longer duration (e.g., 50- or 100-period SMA) and taking trades in the direction of the trend as dictated by that indicator will improve its reliability. In practice, for long entries, EWO should not only be positive, but be getting increasingly more positive. For shorts, EWO should be trending increasingly negative, and the SMA should also be negative.
The Elliott Wave Oscillator is fundamentally a trend-following indicator.
Chande’s TrendScore
Trading forex, stocks and commodities on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. Developed by Ralph Nelson Elliott, author of the Elliott Wave Theory, the Elliott Wave Oscillator is an indicator used to determine where one Elliott wave ends and the next begins. It aims to offset one of the Elliott Wave Theory’s main weaknesses – reliance on accurate wave counting. Copyright © 2025 FactSet Research Systems Inc.Copyright © 2025, American Bankers Association.
Whether you’re just starting out or you’ve been trading for years, the Elliott Wave Oscillator can be a valuable addition to your toolkit. Just remember to keep it simple, manage your risk, and never stop learning. When the oscillator crosses above zero, you’re potentially looking at the start of bullish momentum. I’ve learned the hard way that false breakouts happen more often than you’d think.
