What is the Wolfe Waves wave pattern?

The Wolfe Waves wave model was developed by Bill Wolfe and applied to swing trading strategies. The basic idea of the Wolfe Waves wave pattern is to find market channels that are showing imbalances, by counting the number of waves and drawing trendlines to identify perfect entry points and accurately predict the gain. profit target.

This 5-wave, 5-wave Wolfe Waves pattern creates an up / down the channel or a spike in a bull/bear market.


Wolfe Waves wave pattern - How to count the number of waves Wolfe Waves

Wolfe Waves is a reversal pattern, so it is important to know exactly how and where to look for them, otherwise, a trader can take a big risk from mispredicting and reverse trading a trend that is not over yet. Here's how to count Wolfe Waves waves in a bull market setup:

  • Point 2 is the vertex;
  • Point 1 is the bottom before point 2;
  • Point 3 is the bottom after point 2, point 3 must be lower than point 1;
  • Point 4 is the peak of the price recovery after point 3. Point 4 must be higher than point 1;
  • At this point, we draw a trendline connecting point 1 and point 3. Point 5 is the entry point with the target profit determined on the line EPA (Estimated Price at Arrival - the predicted price at the end);
  • The EPA line (green in the illustration) is linked from point 1 to point 4 and stretched into the future.
Wolfe Waves Wave Pattern - A few examples

Below is a 1H chart of USHJPY pairs with 2 sets of Wolfe Waves:

Simplified chart with predefined waves and lines:


Chart with pre-determined waves and target entry & profit points:


Wolfe Waves wave pattern - How to set stop loss

The stop is placed behind Point 5. You draw a line connecting points 2 and 4, if the price hits this line you can move the stop loss to breakeven.

Trade with Wolfe Waves wave pattern needs to practice pattern detection skills. It may be difficult at first, but gradually you can spot the Wolfe Waves wave pattern on all timeframes: from a 1-minute chart to a monthly chart.

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