What Is the WaveTrend Indicator?
Michael Whitman
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Trading since 2017, full-time since 2020
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YouTube creator, 137K subscribers
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Published 2026-09-15
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Updated
WaveTrend is a momentum oscillator that measures how far price has moved from its own average, then smooths that measurement twice to produce a wave-like line. The double smoothing makes its turns unusually clean to read and unusually late to arrive.
Covered on this page: TradingView.
WaveTrend produces the cleanest-looking oscillator on most charts. Understanding where that cleanliness comes from tells you both why people like it and what it costs.
How it works
Start with distance from an average. Take a moving average of price, then measure how far the current bar sits away from it.
Normalize that distance. Divide it by a measure of how far price typically strays, so the output is comparable across instruments and periods.
Then smooth the result twice. That second smoothing is what turns a jagged measurement into the characteristic wave.
What the smoothing buys and costs
Readability is the gain, and it is real. A double-smoothed line has fewer false crosses than a raw momentum measure, so the signals it does give are less frequent.
Lateness is the cost, and it is unavoidable. Two layers of averaging means the turn appears after the move has begun, by roughly the sum of both smoothing periods.
And it is unbounded. Unlike the RSI, which cannot leave 0–100, WaveTrend’s extremes are conventional levels rather than mathematical limits — so “overbought” here means “further than usual,” not “at a ceiling.”
A worked example
Take the S&P 500 on a daily chart. From 1950 to 2026 it closed up on 53.1% of trading days, so most one-way runs were short and a long one was the exception.
A double-smoothed oscillator cannot respond inside two bars. By the time both averaging layers have registered a turn, a typical short run is already over.
On a long run it works well. The wave turns near the start, stays in one direction for the duration, and reads exactly as the tutorials show.
On the short runs it mostly stays put, which is the smoothing doing its job — and it also means the indicator is silent through the market’s most common behavior.
The signals people actually use
Crosses of the two lines. WaveTrend plots a fast line and a slower signal line; the cross between them is the primary trigger.
Crosses inside the extreme bands. A cross that happens while the oscillator is already stretched is treated as higher quality than one near the middle, on the reasoning that the move had somewhere to return from.
Divergence against price. Price making a new high while the oscillator does not, which is the same divergence logic every oscillator supports and carries the same weakness — divergence is common during continuations, not only before reversals.
None of those is a mechanism. They are descriptions of what the line did, and the line is a smoothed measurement of what price already did. That is worth being explicit about, because the wave’s clean shape invites more confidence than a lagging indicator can support.
The original data
On the S&P 500 from 1950 to 2026, 59% of ten-day windows finished higher and 53.1% of single days closed up. Every round trip pays the spread on top.
The run length is the constraint on every oscillator here. A double-smoothed line needs several bars to confirm a turn, and most runs are shorter than that — so the indicator is structurally suited to the minority of moves that persist.
And each cross acted on costs the spread. Because it is paid on every round trip, an indicator that fires often enough to feel responsive is expensive; one that fires rarely enough to be cheap will miss most moves. That tension is the whole subject.
How it sits against the alternatives
Against the RSI, WaveTrend is smoother and slower, and unbounded where the RSI is fixed between 0 and 100. The RSI’s bounds make its extremes comparable over time; WaveTrend’s do not.
Against the stochastic, it is considerably less jumpy — the stochastic reacts to position within a range and moves sharply, where WaveTrend’s smoothing damps that.
Against MACD, the two are closer than they look: both are built from differences between averages, both are unbounded, and both are read primarily on crosses.
Which means adding several of them tells you very little. They are different arrangements of the same inputs, so agreement between them reflects shared construction rather than independent confirmation.
Where it came from
It is a LazyBear script, published free on TradingView. LazyBear is the handle of a prolific indicator author whose scripts are among the most-used community indicators on the platform.
That matters for two reasons. The code is public, so the calculation can be read rather than guessed at - which is not true of most paid indicator suites.
And the settings are conventions, not findings. The default channel and average lengths are the author’s choices, widely copied because they were the defaults, not because they were tested against anything.
So a page telling you the “best WaveTrend settings” is describing a preference. The honest framing is that longer settings make it smoother and later, shorter ones faster and noisier, and where you want to sit on that line depends on how long you hold trades.
How this connects
An oscillator built from a smoothed distance between price and its own average, which puts it in the same family as the stochastic and RSI.
It is a community script rather than a standard indicator, so implementations differ and two charts labeled wavetrend may not be running the same calculation.
Smoothing is what gives it its look. The characteristically clean crossovers come from averaging, which is also what makes it late.
The volume flow indicator is a common pairing, on the reasoning that momentum and volume are partly independent - which they are, more so than two momentum tools.
And overbought and oversold levels are drawn, not derived - thresholds somebody chose, which behave very differently across instruments.
When it fails
The characteristic failure is trusting the shape. The line is smooth and its turns look decisive, so a cross reads as a clear event rather than a lagging summary — and the eye, reviewing a chart afterwards, lands on the crosses that preceded real moves. The ones that preceded nothing leave no visual trace, because a smooth line wandering sideways is unmemorable. The indicator is not misleading about what it measures; the aesthetic invites a confidence the measurement cannot carry.
A second failure is treating the extreme bands as bounds. They are conventional levels, and the oscillator can exceed them indefinitely.
A third is shortening the smoothing to make it responsive, which removes the only property that distinguished it.
A fourth is stacking it with MACD or the stochastic and reading agreement as confirmation.
And a fifth is trading its divergences without context. Divergence appears throughout continuations and nothing in the indicator separates those from reversals.
Related
Stochastic oscillator covers the bounded oscillator this is measured against. RSI covers the other bounded momentum measure. And volume flow indicator covers a Markos Katsanos indicator whose common TradingView version LazyBear also published.
This indicator is popular because it looks right. The line is smooth, the waves are obvious, and turns appear unambiguous in hindsight — which is exactly the shape of thing that produces confident decisions on a lagging measurement.
— Michael Whitman
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