WAVES II by Westmont

WAVES II by Westmont is a next-generation evolution of the original WAVES indicator, designed to offer improved responsiveness, enhanced functionality, and clearer visual clarity. By incorporating advanced momentum filtering and smoother transitions in the VWAP (Volume Weighted Average Price) area, WAVES II provides users with a more dynamic and actionable tool for market analysis.
This indicator introduces new methodologies, visual enhancements, and advanced forecasting capabilities, making it an ideal tool for traders seeking faster insights and sharper reactions to market movements.

Key Features of WAVES II

WaveTrend Calculation

• The core of WAVES II is the WaveTrend, which is calculated using the HLC3 (High + Low + Close) price.
  
• The WaveTrend is smoothed through two processes:
  

1. EMA (Exponential Moving Average): Applied to the HLC3 to capture faster price movements.
   
2. SMA (Simple Moving Average): Applied to the first wave to smooth out shorter-term fluctuations.
   

VWAP Area Crossover

• WAVES II calculates the VWAP area by subtracting the second wave from the first.
  
• The indicator detects when this VWAP area crosses key levels:
  

1. Bullish Signal: When the VWAP area crosses upward with positive momentum.
   
2. Bearish Signal: When the VWAP area crosses downward with negative momentum.
   

Momentum Detection

• Momentum is calculated by measuring the price change between bars and smoothing this change over a short period.
  
• Positive momentum signals increasing price movement, while negative momentum indicates a slowing or reversing trend.
  
• This momentum detection filters out weaker price movements, highlighting only the significant trend shifts and giving users confirmation of market movements.
  

Visual Enhancements

• Glowing VWAP Lines: The VWAP area is plotted with multiple layers of colors, gradually fading in opacity. This highlights areas of strong price movement and reversals.
  
• Fading Gradient Effect: The VWAP line is filled with a gradient that adjusts its opacity based on the distance from the center line, visually indicating market strength and reinforcing key levels.
  

VWAP Projection

• WAVES II projects the VWAP area forward, based on its recent slope, to offer a forward-looking view of potential price movements. This projection helps traders anticipate short-term market direction and react faster to potential trend changes.
  

Key Differences Between WAVES and WAVES II

Smoothing and WaveTrend Calculation Adjustments

• WAVES: Uses fixed smoothing parameters for WaveTrend calculation, resulting in a relatively stable and slower response to market changes.
  

  The first smoothing (wavetrend1) uses an EMA with a fixed length.
  The second smoothing (wavetrend2) uses a simple moving average (SMA) with a fixed length.

• WAVES II: Introduces more responsive settings like smoothing_length, deviation_length, first_wave_length, and second_wave_length for faster reaction times to market movements. These adjustments make WAVES II ideal for traders who need quicker feedback and sharper market transitions.
  

Momentum Detection

• WAVES: Does not incorporate momentum-based logic, relying only on the VWAP area and its relationship to historical values.
  
• WAVES II: Adds momentum detection, which calculates the difference between current and previous price movements, smoothed over a defined period. This helps identify bullish and bearish trends more accurately, providing additional confirmation and improving signal reliability.
  

VWAP Area Cross Detection

• WAVES: Detects VWAP area crossovers based on recent high and low values.
  
• WAVES II: Refines cross detection by incorporating a momentum filter. A Bullish cross is confirmed when the VWAP area crosses upwards with positive momentum, while a Bearish cross is confirmed when it crosses down with negative momentum. This dual-condition approach enhances signal accuracy and offers better context for trade decisions.
  

Plotting and Visualization

• WAVES: Plots the VWAP line, center line, and uses color transitions for VWAP area fills to represent market conditions.
  
• WAVES II: Introduces a multi-layer glow effect for the VWAP line, with varying opacities, creating a visually dynamic experience. The gradient glow effect provides a clearer representation of market strength and proximity to the center line, making it easier to spot market shifts and interpret momentum at a glance.
  

Why WAVES II Was Created as a Separate Indicator

1. New Features and Functionality:
WAVES II introduces key features like momentum detection and VWAP projections, which significantly alter how the indicator operates. These are not minor updates but represent a shift in how the tool functions, providing faster and more detailed insights for traders. WAVES II gives traders sharper market feedback with improved responsiveness to price changes.
   
   
2. Targeted for Different Trading Styles:
WAVES II is aimed at traders who need faster reactions and more dynamic, reliable signals. While WAVES remains a solid choice for those who prefer a more stable, traditional approach, WAVES II caters to traders who require quicker feedback and more granular market insights. By offering both tools, traders can select the one that aligns with their style, whether that’s for faster decision-making or a more conservative approach.
   
   
3. Visual Clarity:
The enhanced visual effects in WAVES II, such as the multi-layer glow and gradient VWAP transitions, offer greater clarity and a more intuitive charting experience. These visual improvements allow traders to quickly interpret changes in the market, making WAVES II a more effective tool for detailed and actionable market analysis.
   
   
4. Clear Value for Traders:
WAVES II brings significant enhancements over the original WAVES, including more advanced features, faster momentum detection, and better visual representation of market dynamics. This makes WAVES II a more powerful tool for traders seeking dynamic market insights. It is an ideal choice for those who need quicker and more reliable feedback than traditional tools can provide.
   

How to Use WAVES II

• Users can watch for WaveTrend crossovers (when the line crosses 0) and VWAP area dots (bullish or bearish) to spot potential buy or sell signals.
  
• Users can use momentum to confirm signals, helping you identify whether the market is gaining or losing strength.
  

WAVES II offers advanced features, faster responsiveness, and clearer visuals compared to the original WAVES indicator. By introducing momentum detection and refining the handling of VWAP crossovers, WAVES II enhances the overall trading experience, providing more dynamic, actionable insights for traders. While WAVES remains an excellent tool for those who prefer a simpler, more stable approach, WAVES II is designed for traders who seek a more detailed, faster-reacting tool for market analysis.