In this paper we present a modified Metatrader 4 indicator showing wave patterns Wolfe in price charts and any time frame. This tool can be very useful as it automatically identifies these price formations and saves the trader time and work of watching charts for hours looking these and other patterns.
As experienced trader knows everything, the biggest problem with price patterns, especially advanced as Wolfe waves, it is the identification of these formations on the chart. Not only skill and experience to visually find these patterns is required, but also the trader has to spend hours at the computer, with no guarantee that it will find a good opportunity. In addition, only you rarely can see these patterns in its ideal form, almost always presented with some minor variations further complicate identification.
Therefore, this personalized resources are very useful indicator because significantly facilitate the work of the trader.
How is the Wolfe wave indicator for MT4 work?
As mentioned above, once this indicator is installed and activated, displays Wolfe wave patterns bullish and bearish on the price chart and any time frame.
Its main features are:
- It is a custom indicator developed for the platform Metatrader 4 (does not work on other platforms).
- To use the trader has to install it and attach it to the price chart of interest.
- It works on all MT4 time frames.
- Virtually no modifiable parameters, so that is easy to use, even for beginners traders.
- This indicator shows the following:
- Points 1, 2, 3 and 4 of the pattern.
- Draw trend lines 1-3 and 2-4 forming the price channel pattern.
- The section 5 ( recording position to buy or sell is opened) is where the price reaches the line opposite trend point 4. Thus, once the point 4 is formed, just wait the price reaches that line. Hence we open the position.
- Draws an extended line passing through points 1 and 4, which determines the EPA , ie, the level of theoretical prices far should the price if the transaction takes place in favor.
- It also shows formations Wolfe waves produced in the past, so you can check how accurate is the indicator and the result we would have had to follow their signals.
Consider the following example:
H4 chart of CHF / JPY with a bullish wave pattern Wolfe detected by the indicator. MT4 platform of the broker Valutrades
In the above image we see a graph H4 currency pair CHF / JPY in which the custom indicator, which found a bullish wave Wolfe used. As we can see, the indicator displays the points 1, 2, 3 and 4 and movements between these (1-2, 2-3 and 3-4) are indicated by blue lines . It also traces the lines passing through the points 1-3 and 2-4 (yellow lines), which form the wedge-shaped channel. Is the 1-3 line we use to perform the operation, as we wait for the price to drop from point 4 to reach this line, where it is a buy position open . As we see here, the price reaches this line and almost immediately starts to rise (crosses only slightly), so we can say that we are facing a wave of almost perfect Wolfe.
The red line through points 1 and 4 indicates far could the price once it starts to rise from point 5, on the trendline 1-3-5 bullish wave Wolfe. Here we are how effectively the price almost reaches that line.
Of course things do not always develop so simply, these patterns sometimes fail even though they meet all theoretical conditions
Downloading and installing custom Wolfe wave indicator
You can download this indicator at no cost at the following link:
-a modified Wolfe Wave for MT4
For those who do not know how to install Metatrader modified can consult a simple tutorial on indicators this link .
How operate with Wolfe wave indicator?
The rules for operating with Wolfe wave patterns are fairly simple and are described below:
- One opens buy position (bullish wave Wolfe) or sale (bearish wave Wolfe), when the price reaches point 5 from point 4 point 5 is where the price reaches the line 1-3.
- It is recommended to wait for a candela investment price , as confirmation of a possible change of direction in point 5, to increase the reliability of the signal.
- A pending order is placed buy stop ( long positions) or sell stop ( short positions) in order to enter during the breaking of the maximum / minimum investment of candela.
- Position closes once the price touches the red line passing through points 1 and 4, which is used to define the EPA formation. However, sometimes the price actually moves in favor of the signal to buy or sell but fails to reach this line, therefore you can use a t railing stop that follows the price and protect profits as the market moves in favor. Another possibility is to use a stop loss and take profit to keep a ratio of risk: benefit of 1: 2 or 1: 3.