Wolfe Waves - Get in the Zone
Hello traders, welcome to the wonderful world of Wolf Waves!
This post is intended to be a place where newbies and/or seasoned professionals can come together to share, learn, and be encouraged.
The rules are simple: stay respectful and professional. Anything less will not be tolerated.
Before we begin, I would like to thank Bill Wolff, the founder of Wolfe Wave Analysis. I am grateful to have stumbled across his work. A quick overview can be found here:
This post is intended to be a place where newbies and/or seasoned professionals can come together to share, learn, and be encouraged.
The rules are simple: stay respectful and professional. Anything less will not be tolerated.
Before we begin, I would like to thank Bill Wolff, the founder of Wolfe Wave Analysis. I am grateful to have stumbled across his work. A quick overview can be found here:
If you're a struggling trader, frustrated and ready to give up, or just an all-out system-hopping, account-busting, psychotic indicator junkie, then this strategy might be the perfect antidote to your trading efforts. Or, if you're a seasoned professional, this strategy might just be a nice addition to your trading toolbox. In either case, Wolfe Wave Analysis provides a mechanically simple way to enter the so-called "sweet zone" for trading. These transactions have a high probability of success. Additionally, the nature of the Wolfe Wave structure allows you to reduce risk with very clear stop loss areas.
To clarify up front, I do not claim to be a Wolf Wave Master. Most of what I learned came from working on over 1000 charts over the past 6 months. There are some free online resources, but I haven't seen any real discussion of how to find the best price to enter a trade, other than a repetition of basic wave structures and a brief mention of the sweet zone. Do you enter on a trend line breakout, halfway into the sweet zone, at the bottom of the sweet zone, or wait for a clear reversal from some confirmation tool? This is the overarching question we try to answer.
To facilitate discussion, the following abbreviations will be used:
WW = Wolf Wave
CWW = Classic Wolf Wave
HWW = Horizontal Wolf Wave
I think it's best to fully delve into the CWW structure before discussing HWW.
I put this diagram together as a quick reference on what constitutes a valid CWW.
Note: I used XABCD to describe the waves instead of the normal 12345 . The reason is that most traders are probably very familiar with the AB=CD concept and it is an important tool used here to determine the entry price for our trades.
This is the classic Wolfe wave structure
sweet zone
In my opinion, the sweet zone is the most important part of the Wolfe Wave trading strategy. It baffles me how little traders discuss this topic. Understanding the parameters of the sweet zone is crucial to getting the best entry price. The sweet zone can be anywhere between 3 and 300 pips, depending on the steepness of the wave and/or the time frame of the trade. So the question is, where do I enter the trade? What criteria should I use? What tool should I use? Where should my stop loss be placed? I'm glad you asked. These questions and more will be discussed in detail as our research progresses.
Let me make an analogy that I think is relevant to this discussion. Hopefully most traders here are familiar with Major League Baseball. In my opinion, trading in the sweet spot is very similar to when a major league hitter gets into the batter's box. If you talk to professional baseball players about hitting, they will tell you that their main goal is to hit the ball hard. Their goal is to hit the ball hard regardless of where the ball ends up landing or if they get out? How to hit the ball hard. Well, you want to make sure you’re reaching the “sweet spot” of the baseball bat. How did you do it?
Be prepared and patient - make sure your cleats are clean. Make sure your bat isn't cracked. Make sure your gloves are in good condition. Make sure you learn as much as possible about the opposing pitcher ahead of time. What kind of pitches does he throw? What is his “go-to” pitch? What kind of shooting angle does he have? Sidearm? Over the top? How has he marketed to you in the past? What stage of the game are we at? Are there any runners on base? Does he show signs of fatigue? With all these things taken into consideration, the batter will try to "wait" for "his" pitch. By being prepared, patient, and aware of all the relevant information around him, he can be in a good position to try and force pitchers to throw pitches that are right in his sweet zone. When that happens, his odds are stacked against him. I'm sure you get it.
Do your due diligence and be patient. Get price into your sweet zone. Make sure your work area is ready. Make sure your mind is ready. Make sure you have planned all potential transactions ahead of time. A batter entering the batter's zone is the same as a trader monitoring price action as it approaches the sweet zone. If he's not prepared, he may not hit the ball hard. In fact, he might even strike out. If we as traders are not prepared, we may miss the sweet spot, or worse, get out of the game entirely.
If the batter makes contact with the sweet spot on the bat and gets out, he may be disappointed, but he knows he has done his job. Maybe he hit a one-hop hot ball just to see the second baseman make a great diving play. Or he might hit a line drive in the best spot, fly right to the left fielder and get an easy out. That's okay, he did his job, he hit the ball hard in the sweet spot. He may feel frustrated in that moment, but true pros know that eventually, the hits will come, the runs will come, the production will increase.
Likewise, the trader's only goal is to "hit" the sweet spot for trading. Maybe the trade failed because of an unexpected news event, or a low liquidity stop loss. Maybe the transaction failed for reasons we can't explain. That's it, we can analyze what might have gone wrong and add that knowledge to our mental toolbox for the next time we step into the batter's box. As long as we do all the due diligence and discipline to enter the deal at the best price within the sweet zone, then we've done our job. We know that over time, winners will come, points will accumulate, and accounts will grow.
exit strategy
Every good entry requires a good exit. Below is my mechanical exit strategy (I like to split my positions into thirds). I use points X, C and A as reference points for exit. Depending on the nature of the S/R, price action is likely to increase at these points. In practice, I would set my TP levels 5-20 points below these three levels depending on the time frame. I'm usually very conservative with my TP. I don't want to set my price target at a certain level just to see a big price reversal without holding on to some points.
Note: When the price reaches TP #1 just below the X level, then the stop loss for the remaining two positions will be moved to BE.
Indicator list
Wolf wave indicator set
Below is a set of the best Wolfe Wave indicators of all time (in my humble opinion). There are actually 3 of them, each with instructions. Member "Parviz1953" put a lot of effort into developing, modifying and improving this indicator. Many thanks to him for his generous donation of this article. I will publish the latest version when there are new modifications.
1) Version 8.5: is manual, you click a button and select the depth you want and full or potential CWW.
2) Version 9.7.2: is automated, it looks for all possible combinations and when they are found, draws a button for each combination so that you can select the combination you are interested in and display its characteristics. In this version, when the indicator finds all possible patterns, it stops and looks only once, if you want to see the latest patterns, press the " Search again " button (the indicator does not redraw) New feature: FIB projection value . For example, in a potential CWW, this feature is useful when you want to know the amount by which the CD projection exceeds AB=CD
3) Version 9.6.1 : Basically the same as 9.7.1, the difference is that it does not stop searching after finding CWWs, and always looks for new ones as they are developing, so "redraw", if you want to stop the program, by clicking the button of any pattern, the program stops searching, so you can check the selected pattern if you want, without losing it if it finds a new pattern. You can restart the indicator again by clicking on the " Search Again " button. (This version uses a lot of CPU time because it is always running and doing a lot of calculations
NOTE: There are no shortcuts to mastering Wolfe Wave trading or any other trading method. I think traders must take the time to learn how to draw Wolfe waves manually. Having a working knowledge of structures and the ability to discover them yourself will go a long way in improving your results. Having said that, this metric is simply fantastic. It's versatile and user-friendly. As you read through this thread (and I hope you do), you'll see how many modifications and improvements were made. This will give you powerful skills on how to use this indicator to your advantage. Please understand that this indicator will find many, many WWs. You will find that some waves have excellent symmetry and some waves have terrible symmetry. Some waves have very steep angles, while others are almost horizontal. Your job is to sift through these waves and find those with the most potential. Good waves with a multi-layered converging structure are diamonds in the rough and offer the highest probability of success.
Filter your transactions: After #1286
If you have any questions, please feel free to post your diagram. I'm here for as much as you are. Maybe you have some good filters to share with us, or different parameters when entering a trade. We are all in this together. My hope is that "iron sharpens iron" and the end result will be a growing group of experienced Wolf Wave Masters.
final thoughts
WW works on all currency pairs, timeframes and instruments. WW are often the endpoints of other larger, more complex harmonic structures. I've noticed that currency pairs and markets in general tend to go through harmonic phases. Organizations seem to be growing everywhere. Other times, price action looks like an antelope fleeing a cheetah.
Be especially careful when trading volatile currency pairs on smaller time frames. With low liquidity, it would not be very prudent to attempt to trade GBP/NZD with a spread of 5 pips on the 5 minute time frame. There are many setups every day so there is no need to force a trade in these high risk situations.
Pay attention to news events. Active trading on smaller timeframes is very susceptible to spikes and widening spreads .
When monitoring your active trades, be aware of any smaller global moves that are developing within the larger waves. These smaller waves may give you a clue that it's time to close in and close the trade manually.
But most importantly, make sure you enjoy the chase. Trading is hard work and can be frustrating at times. To me, the best feeling in the world is tracking, executing, and winning trades. Trading is my job and I absolutely love going to work!
personal notes
My name is Kurt. I am a 50 year old single parent of a beautiful 5 year old girl. I'm usually pressed for time but will do my best to respond to any questions, comments, or concerns. I spend a lot of time coaching and volunteering in my daughter's kindergarten class. I am also actively involved in ministry and the community at large. Trading is a difficult journey, but a rewarding one. It's never been about money, it's been about freedom. Trading has truly been a blessing in my life. Good luck to all those who dream and thank you for participating in this topic.
“Problems are just opportunities to find solutions”
Below are a few initial examples of CWW, along with an explanation of how I determine the most prudent sweet spot entry price.
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