The Wave 5 Start indicator looks for the end of Wave 4 of a characteristic Elliott Wave pattern and marks that point on the price chart with a large colored dot. The dot will be magenta above the bar high if it marks the beginning of a Wave 5 down. The dot will be dark green below the bar low if it marks the beginning of a Wave 5 up. This point has been found to have a high correlation with potentially significant moves following a Wave 4.
When an oscillator valley is shallower than its predecessor while the price corresponding to the most recent oscillator valley is lower than the price corresponding to the previous oscillator valley, a “normal” diverging condition has occurred which generally signals an imminent price reversal to the upside.
The paintbars have one input value, LENGTH. The optimum value for this input will vary from market to market and time frame to time frame. We have found a value of 5 to work well on the S&P and T-Bond 5-tick and 1-minute charts. A value of 6 works well on the S&P and T-Bond charts with time scales ranging from 3 to 30 minutes.
This study automatically looks for the occurrence of Arps “Fox” Wave 1-2-3-4 megaphone patterns. When the correct pattern occurs, the study draws an “entry” line and a “target” line, along with a line showing the approximate target arrival time.
This stop is a modified version of Wilder’s Parabolic Stop concept, providing more control over the input variables and reducing whipsaws in choppy markets. The concept was described in an article by Dennis Myers in the April, 1995 issue of Stocks and Commodities Magazine and is based on a trailing exponential moving average whose sensitivity increases with each bar after entry, up to a maximum value, MAX.
This is a highly effective volatility-based adaptive trailing stop which captures the majority of the position profit while minimizing whipsaws. The input value, “STOPSENS”, adjusts the probability for the next bar’s expected range to stay within the limits projected by the stop algorithm. It is usually best to determine this sensitivity value empirically by experimenting to find the best value which keeps the stop point just out of range of the typical pullbacks in price within the trend. Typically, we find that an input value range between 1.5 to 5 works well, with the smaller value giving a closer stop.