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-   -   A new look at Wolf Waves (https://www.forexfactory.com/showthread.php?t=580759)

profitkeeper Feb 28, 2016 4:59pm | Post# 1

A new look at Wolf Waves
 
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This is a summary by Bill Wolfe from a contributor later in this thread.
Wolfe-Wave-book (1).pdf
First of all, I must say that this is not my primary trading system, but I have recently started using Wolf Waves with some success. There was only a couple of other threads on this topic on FF and they quickly died.
I'll start with my understanding of the concept, and expand from there. I would appreciate any active users of this system (classical or modified) to chip in.

The classical system as I understand it is illustrated by the H4 CAD/JPY chart below from last week.Click to Enlarge

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We are looking at a wedge shaped pattern with a count of tops/bottoms or waves. If it is a falling wedge, then #1 is at the bottom. If it is a rising wedge #1 is at the top.
The count goes to 5 which should penetrate line 1 to 3. When 5 is reached, a pending order is placed on the other side of line 1 to 3, with a stop below point 5.
A line is drawn from point 1 through point 4. This is the profit target line. Entry and profit target are illustrated by the green and pink arrows.
This trade had a 69 pip SL and a 325 pip profit target which was reached.
I like this system because of the clearly defined entry, stop and profit target.

I will go into the variations on my next post.
I just noticed that I misspelled Wolfe. I omitted the 'e' on the title and the first several posts.

Edit: Here is a link that is good: http://www.forexmt4.com/_MT4_Tutoria...fe%20Waves.pdf
Another link with a lot of charts: http://www.chart.nu/wolfewave.htm

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profitkeeper Feb 28, 2016 5:17pm | Post# 2

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As mentioned in the previous post, there seems to be a few variations on Wolf Waves. Some say that a parallel channel or even a megaphone pattern will work the same way. I give you an example of 2 almost parallel channels again from last week, both of which hit their profit targets.
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As you can see, the second example on this chart, point 5 only barely penetrated line 1 to 3. Some say that this is not important if there are other confirming factors such as an oversold oscillator, candle pattern, or even price below/above the Bollinger Band. In this case, we have all three.

profitkeeper Feb 28, 2016 5:45pm | Post# 3

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OK, here are two current examples of WW.
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I don't like initiating trades at the end of the weekend, because of gaps, spread widening and unreliability, but here they are.
The first is a parallel channel and the second is a wedge.

You can use Wolf Waves on any time frame even though I have shown only H4 examples.

profitkeeper Feb 28, 2016 6:32pm | Post# 4

I just noticed that I probably broke the rules on the AUD/JPY current illustration above. The channel is sloping slightly down and maybe the count should have started low not high. It raises an interesting point. If you accept that an equal sided channel is valid, and it is horizontal, where should the count start?
I know that criticism will be leveled that the system is too discretionary, but all systems need discretion. The nice thing about WW is that the trade is opened with a pending order with plenty of advance warning, and if price does not come back across line 1-3, the order is not triggered. Also, stops are fairly tight compared to the profit target, giving a good RR.

profitkeeper Feb 28, 2016 6:49pm | Post# 5

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Another current and past example on EUR/CAD H1 chart. On the current example, you will notice that price actually gapped a bit lower (16 pips) because of the weekend before moving up.

Poocher Feb 28, 2016 9:53pm | Post# 6

Nice profitkeeper!

But be ready for some challenges from those with differing definitions of what makes up a Wolf Wave.

Some would say the nearly parallel "wedges" aren't wedges so aren't Wolf Waves. But if the parallel channel "wedges" with the 5 points make you money that's all that matters.

profitkeeper Feb 28, 2016 11:49pm | Post# 7

Nice profitkeeper! But be ready for some challenges from those with differing definitions of what makes up a Wolf Wave. Some would say the nearly parallel "wedges" aren't wedges so aren't Wolf Waves. But if the parallel channel "wedges" with the 5 points make you money that's all that matters.
Thanks Poocher,
I would accept that criticism. I did find examples of parallel wave counts on the net, so I included them. I draw the line at megaphone formations which I also found, but maybe they work too. I had to laugh at the comment on Tom Bulkowski's web site when he was evaluating Wolf Waves. He contacted Bill Wolf to ascertain the complete rules for the pattern. Wolf's only reply was to buy his $3,000 course.

GnWFx Feb 29, 2016 10:10am | Post# 8

Your EURCAD, USDCHF and AUDJPY examples are not valid Wolfe Waves as points 3 and 4 have to be on opposite sides (above and below) of point 1.

Also I have found that all these tops and bottoms lie on some fibonacci level. Particularly important are 1.13, 1.272 and 1.618

GnWFx Feb 29, 2016 12:30pm | Post# 9

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There was a good one on USDCAD H1 earlier last week.

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profitkeeper Feb 29, 2016 2:19pm | Post# 10

Your EURCAD, USDCHF and AUDJPY examples are not valid Wolfe Waves as points 3 and 4 have to be on opposite sides (above and below) of point 1. Also I have found that all these tops and bottoms lie on some fibonacci level. Particularly important are 1.13, 1.272 and 1.618
Thanks for contributing.
You may well be right, although I have not seen this rule before. I will try and restrict my examples to this in the future.
Your comment on fib levels is interesting. From which points are you pulling the fib?

profitkeeper Feb 29, 2016 3:14pm | Post# 11

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OK, Here's one from last week that complies with GNWFx's rule
Click to Enlarge

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An update on the other current trades:
USD/CHF - not triggered - invalid
AUD/JPY - in progress so far 68 or 121 pips depending on whether you entered on the line cross or candle close
EUR/CAD -Only made it to the other side of the channel (which may be a good first profit target) for 54pips

profitkeeper Mar 1, 2016 1:50am | Post# 12

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I thought I had included this one from Sunday trigger.
It's an H1 chart that hit it's target for 119 pips
Click to Enlarge

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GnWFx Mar 1, 2016 5:48am | Post# 13

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Per the rules, point 4 is the highest high or lowest low between points 3 and 5. Thus the target line drawn on your EURUSD chart is incorrect. Actually it is a failed Wolfe Wave as the target was never reached.

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Though right after this one, there was another Wolfe Wave which did make the target.

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Also about the Fibonacci ratios, tops and bottoms on valid Wolfe Waves usually lie on some fib level.

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Happy Trading.

profitkeeper Mar 1, 2016 3:42pm | Post# 14

Hi GN,
Perhaps you could give us a complete set of rules (save misunderstanding on my part). Either that or I could rename the thread Coyote Waves with hardly any rules.
One rule I did find was that there should be a regular time between all waves which would invalidate your example H1 example. If you use a line chart (closing price). my H1 chart was valid. No wonder previous threads on Wolfe Waves died.

GnWFx Mar 2, 2016 12:28am | Post# 15

Hi profitkeeper,
Please don't feel offended on things I pointed out which I felt were errors. The rules can be found here and at several other sites. I am sure you must have studied them thoroughly. Wolfe Waves are powerful setups. Keep up your good work.

profitkeeper Mar 2, 2016 1:59am | Post# 16

No offence taken GN.
I'm glad to have your input.
The frustration is on my part - trying to nail down the exact parameters of the pattern. I had gone over Bill Wolfe's webpage and still couldn't see the specific "rules" you mentioned. Other sites I have come across had bits and pieces which often contradicted each other. One of my aims in starting this thread was to get input from anyone who may have taken the course, or at least used the waves on a regular basis. I can see the potential and hope to continue using the concept in one area of my trading.

GnWFx Mar 2, 2016 2:15am | Post# 17

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Wolfe Waves are not part of my regular repertoire of analytical tools. A few years ago I had done extensive work on them and had loads of saved charts. This one, for instance, on EURUSD weekly chart took about a year from start to finish.

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Now that you have revived my interest in this pattern, I will be looking at more examples of currently developing Wolfe Waves and let's share our experiences with them.

profitkeeper Mar 2, 2016 2:42am | Post# 18

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Weekly!!
That must have generated a lot of pips.
On the other end of the spectrum, I was playing around with 5 minute charts and found this little pattern (it probably breaks a rule or two), but pips were there for the takingClick to Enlarge

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GnWFx Mar 2, 2016 3:37am | Post# 19

Correction. Point 3 and 5 are higher highs or lower lows after point1. In your GBPJPY chart point 3 is slightly lower than point 1. This one is probably a failed breakout of a flag pattern, which is pretty rare as flags are continuation patterns.

profitkeeper Mar 2, 2016 4:03am | Post# 20

But a flag pattern doesn't break back down from point 5 like my Coyote pattern does. Seriously, I knew it didn't quite comply, but I loved the way it hit the profit target to the pip.
It's after 1:00am here and I'll say good night


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