WaveTrend Oscillator Signals from Overbought and Oversold Crossovers

Summary

This indicator note explains a WaveTrend oscillator port and describes two proposed crossover signals: a bearish signal when the oscillator crosses below its signal line while above the overbought band, and a bullish signal when it crosses above the signal line below the oversold band. The calculation smooths median price, measures its deviation from that smoothed value, normalizes the deviation, and applies further smoothing. It plots two oscillator lines, their difference, and upper and lower threshold bands.

The note specifies channel and averaging lengths of 10 and 21, a four-period signal average, and paired threshold levels at 53 and 60 in magnitude. It provides an indicator formula but no market, timeframe, backtest, or performance evidence. The crossover interpretation is presented as a general heuristic, so signals may lag or fail, especially in persistent trends or noisy markets. Thresholds and smoothing choices may need testing for the instrument and timeframe in use.

Key ideas

• WaveTrend uses smoothed, normalized deviations of median price to construct its oscillator.
• The note describes a potential sell signal when the oscillator crosses below its signal line above the overbought band.
• It describes a potential buy signal when the oscillator crosses above its signal line below the oversold band.
• The indicator includes two smoothed lines, their difference, and paired overbought and oversold thresholds.
• No backtest evidence is provided, and the crossover rules are presented as heuristics.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.