WaveTrend Trend Following with Zero-Line Direction Changes

Summary

This strategy uses the WaveTrend oscillator to set a bullish or bearish market state. It calculates the oscillator from price data, treats positive readings as bullish and negative readings as bearish, and enters when that state changes. An option limits trading to long positions, while arrows and background colors can show state changes and direction.

The document describes the rules and adjustable display and direction options, but gives no performance results. It warns that state changes can produce false signals, particularly in ranging markets, and that the indicator does not measure trend strength. The strategy has no stop loss, so losses may grow before an opposing signal appears. Parameter testing, additional signal filters, stops, and position sizing are suggested as possible improvements; their effectiveness is not demonstrated.

Key ideas

• The oscillator's sign defines the strategy's bullish or bearish state.
• A change in state triggers an entry in the corresponding direction.
• The strategy can be configured to take long trades only.
• Ranging markets may generate false signals, and no stop loss is specified.
• The document proposes filters, parameter tests, and risk controls but reports no test results.

Tags

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