Using Autowave?

Hi Folks,

Searched through all the threads (and Google) and couldn't get a definitive answer as to how best use the Autowave Indicator. Can anyone please post a link or a FAQ please? Thanks.

Have you taken Gary Williams classes? He explains it well

I haven't taken Gary Williams classes. Is their anything I can see online now?

There is not much that you can find on Autowave. Autowave was an indicator that was found in Qcharts and it has transferred over to the Alchem charts platform. It is not something that is proprietary to Gary or his system. It is just another tool that is used to hone in on a good opportunity. The auto wave uses fib sequences (and probably some algo to go with it) to predict when a current move may be coming to an end. It is different on every time frame that you use. So just because you have a yellow autowave on a smaller chart, it does not apply to the move on the larger chart. It just suggests that the move in a particular direction on a particular chart may be ending or over. Now that is not to say that the autowave is correct, it is just a mere suggestion or something to be aware of. Certainly it is not something that you need to know, however it can be nice to know. Don't get too wrapped around it!

Agreed... don't get too caught up using autowave. Just a tool. Yes, I do require it but it is only one piece of the puzzle. While attempting to duplicate many moons ago, my research suggested the algorithm looks at potential turning points based on :1) Popular fib retracement levels and 2.) fib time series. If a trade went long enough without hitting a popular retracement level (but came close) and then also reached a certain number of fib days out in time then the a/w would subdivide the wave into two. This was the subdivide setting that some folks previously asked about in this forum. The part where most folks got it wrong is that they were expecting "X" number of candles from a high to low or low to a high. Not exactly how it works. Fib time series are waves: high to high and low to low.

Example: assume someone set the a/w time series to 13 with subdivide wave on. Some expected there to be 13 candles for each swing. There wasn't so they gave up. A closer examination shows that 100% of the time, each defined a/w low to low and high to high were at least 13 candles apart (i.e., this is where subdivide came into play).

That's about all I know. A few years ago I was successful with duplicating the model in Excel. Pulling historical data, inputting my assumptions, and flagged where I expected the turns to be based on my assumptions above. I did not have a large sample size but did run 10 stocks back for 2 years each. I nailed all turning points on 9 stocks and missed one turn by a few days on the last stock which indicated to me that I was in the ballpark (but maybe in the wrong seat). It can't be that hard for someone with the coding skills. As others have mentioned, Alchem successfully duplicated. I gave up because I like Alchem personally. Also use TradeStation as a backup. TS doesn't have a/w but has an indicator someone else built that can be customized to approximate a/w. Close is good enough as it is one tool.

Good luck with your endeavor but please remember it is only a tool. I require it but could very easily do without it. Just another level of confidence. Can just as easily trade without and if I needed to know then most charting platforms offer fib retracements. Some even offer fib time series used for wave calcs.

NCT

Robert's AutoWave for TOS seems to be pretty spot on to me. I fiddled with it for a long time, but his was way better than anything I could come up with. It seems to be step for step in tune Alchem charts. I'm can't say about comparing it to Qcharts since I don't use it anymore.

R

Great explanation, NCTrader. I can add a little bit to the discussion.

The wavelength sets how far forward and backward the indicator looks for either a high or low point. With the wavelength set to 13, as in your example above, then for a high point to be valid, it must be the highest point going backward 13 candles; and it must be the highest point going forward 13 candles.



If you notice in the image above, the cyan colored candle would have met the requirement to be highest point looking backward 13 candles, but it was not the highest of the 13 candles looking forward. Neither was the next, or the next or the next several candles. So...the yellow auto-wave line had to be extended until a high was reached that did fulfill both requirements.

Same thing, but opposite, for the low points.

Simple enough. Find the low point that meets both requirements (lowest of 13 going back and lowest of 13 going forward) then draw a line to the high that meets both, then the next low, the next high...etc.

But, sometimes it's not so cut and dry. Take a look at the next image.



Starting from the left, the magenta bar is the lowest point looking backward 13 candles and it is the lowest point looking forward 13 candles, so it is a valid low point.

Then we come to the first cyan candle. If you count the candles, you can see that it is the high point going back 13 and forward 13. So, it is a valid high point.

The second cyan candle also meets both requirements—high point going back 13 and forward 13. So, it is also a valid high point.

None of the bars between the two cyan bars are lower than both the 13 before and the 13 after. So, now we have a problem because there is not a valid low point between those two high points and we never want the line to connect from high to high or from low to low. It should always alternate high-low-high-low.

So what can be done?

Subdivide.

Use the lowest point between the two highs so that the line will alternate low-high-low-high as is should.



- robert


Professional ThinkorSwim indicators for the average Joe

Excellent explanation! Now that you mention it I did have some type of forward looking calculation in my Excel model. It's been quite some time since I researched but will definitely flag the post for future reference. Appreciate your insights.

NCT

Thank you fireman1984, NCTrader, RichieRick, & robert for your detailed and informative responses.