WaveTrend Oscillator
channel_length = 10 (2–50) • average_length = 21 (5–100) Overview
The WaveTrend Oscillator is a sophisticated momentum indicator that calculates the True Channel Index (TCI) to measure market momentum with exceptional clarity. Originally created by The Trading Center and later popularized by LazyBear, this oscillator combines average price calculations with exponential smoothing and deviation measurements to produce two lines that oscillate around zero, similar to MACD but with enhanced responsiveness and fewer false signals.
The indicator's calculation involves multiple steps: starting with the average price (HLC3), applying exponential moving averages, measuring deviations, and finally producing a smoothed oscillator that ranges typically between -100 and +100. The dual-line system (WT1 and WT2) creates clear crossover signals while the overbought/oversold levels at ±60 and ±53 provide additional context for market extremes. This design makes WaveTrend particularly effective in cryptocurrency and volatile markets.
Interpretation & Trading Signals
Crossover Signals:
- Buy Signal: WT1 crosses above WT2 while below oversold level (-60)
- Sell Signal: WT1 crosses below WT2 while above overbought level (60)
- Momentum Confirmation: Crossovers near zero line indicate trend continuation
Overbought/Oversold Levels:
- Level 1 (±60): Primary overbought/oversold threshold
- Level 2 (±53): Secondary alert level for early warnings
- Extreme Readings (±80): Highly stretched conditions, potential reversal zones
Divergence Trading:
- Regular Divergence: Price makes new high/low but WaveTrend doesn't confirm
- Plus Divergence: Divergence occurring beyond ±60 levels (stronger signal)
- Hidden Divergence: Trend continuation signals in strong trends
Example Usage
Code examples will be available once the Rust implementation is complete.
Performance Analysis
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