Elliott Wave Oscillator Indicator
Elliott wave oscillator is a technical tool for trading the Elliott waves. The indicator is an ideal tool for detecting trend reversal.
Description
The Elliott wave oscillator is based on the Elliott wave theory by Ralph Nelson Elliot. According to the theory, the market moves in waves. The waves consist of three impulsive moves and two corrective moves. In other words, there are ups and downs in the direction of the trend. Elliot helps to detect these waves and integrate them into your trading strategy. The oscillator works in all instruments. While you can use it in a short-time trade, it works best on medium to long-term trading.
How to use the Elliott Wave Oscillator
The market price forms five waves. The first, third, and five waves are in the direction of the trend. The second and fourth waves are corrections. The indicator shows the strongest reading when the third wave forms and the price touches new highs. The price touches new highs when the fifth wave forms, but the oscillator diverges. In simple words, the price jumps to new highs, but the oscillator makes a lower high. This marks the end of the pattern signaling the trend reversal.
The same case applied for a downtrend. The third wave coincides with price drops in the direction of the trend. The price dips to lower lows when the fifth wave forms, but the EWO diverges.
Trading Example
The indicator shows price movement for the Australian dollar against the Canadian dollar. The price chart forms waves. The oscillator forms the biggest low when the third wave makes a lower low/ new low. However, the price hits a lower low during the fifth wave, but the oscillator makes a higher low. This indicates that the wave pattern is coming to an end, and the price poised is for a reversal.
Conclusion
The Elliot wave indicator makes it easy to trade using the Elliott waves. It points to the wave formation, highlighting the end of the Elliott wave patterns and the impending price reversal. This indicator appeals best to people who trade using the Elliott wave.