WOLF WAVES
waves belong to swing trading methods. It was developed by Bill Wolfe., it is a naturally
occurring trading pattern present in all financial markets. The pattern is composed of five waves
showing supply and demand and a fight towards an equilibrium price. These patterns can
develop over short- and long-term time frames such as minutes or weeks and are used to
predict where a price is heading and when it will get there.
- Waves 3-4 must stay within the channel created by 1-2
- Wave 1-2 equals waves 3-4 (shows symmetry)
- Wave 4 is within the channel created by waves 1-2
- There is regular time between all waves
- Wave 5 exceeds trendline created by waves 1 and 3 and is the entry point
point 2 is a top.
- point 1 is the bottom prior to point 2.
- point 3 is the bottom after point 2, point 3 must be lower than point 1.
- point 4 is the top of the rally after point 3. Point 4 must be higher than point 1.
At this stage a trend line is drawn connecting point 1 and 3. An extension of this trend line will project the reversal which will come at point 5.
Point 5 will most likely exceed the trend line drawn from 1 to 3. Point 5 is the entry point with a target at EPA (Estimated Price at Arrival) line.
EPA line (the green line on the illustration) drawn from point 1 to 4 and is extended into the future.
Stops with Wolfe waves
The Stop is placed behind point 5.
If to draw a line from point 2 to point 4, then once price reaches that line, we can move the stop loss to break even level.
