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Elliott Wave Oscillator Indicator for MT5

In the 1930s, Ralph Nelson Elliott developed the Elliott Wave Theory, which quickly became popular for its effectiveness.

However, not all traders are interested in observing a valid wave-like structure. The Elliott Wave Oscillator was later developed to help traders objectively identify possible wave-like structures, which is very important for trading with Elliott Wave Theory type strategies.

What is the Elliott Wave Oscillator Indicator?

The Elliott Wave Oscillator (EWO) is a momentum-based trend-following indicator that plots the direction of the trend and momentum as an oscillator. This indicator is based on the concept of Elliott Wave Theory. It is designed to help traders identify possible wave impulses as well as corrective waves.

How does the Elliott Wave Oscillator indicator work?

The Elliott Wave Oscillator calculates the difference between the 5-period simple moving average (SMA) and the 35-period moving average (SMA). Some versions of the EWO use the closing price as the basis for the pair's underlying SMA. This version of the EWO uses the average price of each bar as the basis for its SMA line. The EWO indicator then plots the difference as a histogram bar. The color of the bar also changes depending on whether the current bar has a lower or higher value compared to the previous bar.

Positive light green bars indicate a strengthening uptrend, while positive green bars indicate a weakening uptrend. Negative red bars indicate a strengthening bearish trend, while negative maroon bars indicate a weakening bearish trend. 

This version of EWO also draws signal lines along with the EWO histogram bars. The signal line is essentially the five-period SMA (Simple Moving Average) of the EWO histogram bar and is plotted as a dotted line.

Elliott Wave Oscillator Indicator for MT5

How to use Elliott Wave Oscillator Indicator for MT5

This version of the Elliott Wave oscillator allows modification of the variables used for the EWO bars and their signal lines. This change can be made in the indicator settings.

How the Elliott Wave Oscillator indicator works

The Elliott Wave Oscillator can be used as a trend direction filter, where traders will only take long trades when the bars are positive and sell trades when the bars are negative.

It can also be used as a trend reversal signal indicator based on the crosses of the EWO bars and signal lines coming from overly high levels.

A bar cross from positive to negative and vice versa can also be considered a trend reversal signal.

However, the purpose of its use is simply to identify wave-like oscillations of price action.

Buy trade settings

When to enter?

Identify an uptrending market based on price action and positive EWO bars. Wait for the retracement and open a buy order as soon as the EWO bar crosses the signal line. Place a stop loss at the support below the entry candle.