WOLFE WAVE TRADING STRATEGYBest Wolfe Wave Strategy – Bearish Wolf Wave
When trading the best wolfe strategy you will find that after the entry was triggered your position should show you an immediate profit. This is because the reversal pattern that emerges from the wolfe wave chart pattern is very violent.
Once we’ve got the first five waves we have the general setup of the wolf wave. After the last wave has broken below the range channel it’s the time to get ready for some action.
Step #1: Prior to the Bearish Wolfe Wave Formation look to have a clear Bullish Trend
Firstly, before the first wave to develop we need to have a clear trend that needs to be reversed. For high probability trades we want to see a prior bullish trend before the bearish wolfe wave develops. This step is quite essential if you want to correctly trade the wolfe pattern.
Step #2: Try finding a 5 wave move that can be contained in a channel. Last wave 5 must break outside the channel.
A valid wolfe wave is composed of 5 waves that follow some simple rules. However, the most important rules are that wave 2 and 4 must be contained within the channel created by Wave 1 and Wave 2.
Secondly, wave 5 breaks outside the trendline created by wave 1 and wave 3.
Step #3: Buy after we break and close inside the Price Channel.
At the moment when the price enters and closes back into the price channel, we want to enter a position. We like to wait for the close inside in order to eliminate possible fake breakouts.
Note * If we don’t get a close back into the price channel we don’t have a valid trade signal.
Another sign to look for is how quickly it goes back into the channel. We prefer to only trade the wolfe patterns that retrace very quickly back into the range.
This is a sign that smart money reversal are at work.
Remember, in trading you only want to trade the high probability trade setups.
Step #4: Draw a trendline that connects the wave 1 high and wave 4 low and extend it in the future. Take profit when the EPA line is hit.
The line that connects the wave 1 low and wave 4 high is called the wolfe wave EPA line.
The EPA line stands for Estimated Price at Arrival and it’s an effective take profit strategy. The EPA line main purpose is to show at what price the market will extend after it reversed the previous trend.
Note* If the EPA line is too steep, often time it means that the price will never reach it. In this case you want to take profits early.
Step #5: Hide Protective Stop Loss below Wave 5
The protective stop loss can be located below the last wave or wave 5. This strategy gives us a very tight stop loss which is good for our risk management strategy.
Obviously that a break below wave 5 means we also break first below the channel and this will invalidate the validity of the wolfe wave chart pattern.
The wolfe wave strategy is a trading strategy built around waves the same like Elliott Wave trading. We use other trading concepts like channeling and price symmetry to find the best possible trade signals.
If the trade works in our favor then we have a really good chance to have a good trade in terms of risk to reward ratio. With trading experience it will become much easier to spot the wolfe wave patterns.
Note** the above was an example of a SELL trade using the best wolfe wave strategy. Use the same rules for a BUY trade.
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