The Elliot Wave Oscillator (EWO), or 5/35 Oscillator, is the difference of, a 35 and a 5 period, simple moving average (SMA) of prices depicted as a histogram aligned above and below a zero level. It defines the inner workings of the market driving force at its current state. The indicator’s method (SMA), period lengths and midpoint can be tweaked by the user.
One of the core principle of the Elliot Wave oscillator is that the lowest/highest point of the oscillator is linked to the bearish/bullish Wave 3 of the swing. The principle suggest that Wave 4 breaks the zero level in the trend opposite direction.
Wave 5 is likely to make a fresh low or high price for the swing but continuously deviates from the Oscillator. It is said not be a Wave 5 if the supposed Wave 5 forms a fresh extreme price concurrently with a fresh Oscillator extreme (peak/trough).
The formula for the Elliot Wave Oscillator is quite simple. To be able to get the display as shown in the chart, the following formula is plotted as a histogram:
EWO = Mov(Close, 5) – Mov(Close, 35).
Trades that are not confirmed by an oscillator are riskier than those confirmed by an oscillator. When the Elliot Wave Oscillator begins to depict a sequence of lower highs while price forms higher highs, it is wise to get ready for a trend reversal.
A bullish pattern ensues when the indicator forms lime colored histograms above the zero level. Red histogram below the zero level is indicative of a bearish pattern.
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart window indicator
Customization options: Variable (FastMA, SlowMA, PriceSource, SmoothingMethod, ShowMA, MaPeriod, MaMethod), colors, width & Style.
Time frames: 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week