wave3's Key Indicators Made Simple

wave3 uses easy-to-understand indicators to help you spot strong market trends quickly. Think of these like dashboard warning lights in your car - they help you understand what's happening at a glance.

EMAs (Speedometers for Trends)

EMAs are like the "average speed" of prices, but they pay more attention to recent movements - just like you'd focus more on what's happening right in front of your car than what happened miles back.

Simple Formula: New EMA = (Today's Price × Weight) + (Yesterday's EMA × (1 - Weight))

How to Use Them:

  • Up or Down? Price above EMA = uptrend (like driving uphill). Price below EMA = downtrend (like driving downhill).
  • EMA Teamwork: When short EMAs (20-day) are above long EMAs (50-day, 200-day), it's like gears working together - the trend is strong.
  • Crossovers: When a fast EMA crosses a slow one, it's like changing gears - might mean the trend is changing.
  • Bounce Points: In uptrends, prices often "bounce" off EMAs like a basketball bouncing off the court.

Real Example: If Bitcoin's 20-day EMA is $60,000 and price is $63,000, it's 5% above average - showing strong upward momentum.

Pro Tip: The EMA Ladder

When EMAs line up like ladder steps (20 > 50 > 200), the trend has strong "legs" to keep going. It's like having multiple engines working together.

RSI (The Market's Pulse)

RSI measures how "exhausted" or "energized" the market is, like a fitness tracker for prices (0-100 scale).

Simple Idea: RSI = How many "up days" vs "down days" recently

  • Overworked/Overrested: Above 70 = maybe too pumped (could slow down). Below 30 = maybe too tired (could bounce back).
  • Strong Trends: Like a marathon runner, markets can stay "pumped" (high RSI) or "tired" (low RSI) for long periods during strong trends.
  • Warning Signs: If price makes new highs but RSI doesn't (or vice versa), it's like the engine revving but the car not moving - something might be wrong.
  • Bullish/Bearish Zone: Above 50 = generally healthy, below 50 = generally struggling.

Real Example: If Bitcoin hits a new high but RSI is lower than its last peak, it's like climbing a mountain with less oxygen - harder to keep going up.

Pro Tip: RSI in Trends

During strong trends, don't assume high RSI means "sell" or low means "buy" - it often just confirms the trend's strength. Like a runner's high pulse doesn't mean they'll stop running.

VWAP (The Fair Price)

VWAP shows the "average traded price" for the day, weighted by how much was bought/sold at each price - like the average price all traders paid today.

Simple Idea: (Price × Volume) all day ÷ Total volume

  • Bullish/Bearish: Price above = buyers winning. Price below = sellers winning.
  • Bounce Points: Often acts like a magnet - prices tend to return to it during the day.
  • Big Players: Institutions often buy below VWAP and sell above - like shopping for deals.

Real Example: If VWAP is $50 and price is $52, most traders are "in profit" today - might encourage more buying.

Pro Tip: VWAP as a Tug-of-War

Price above VWAP = buyers leading the tug-of-war. Below = sellers winning. The farther from VWAP, the more stretched the "rope" is before snapping back.

Volume (The Fuel Gauge)

Volume shows how much is being traded - like how many cars are on the road. More volume means more people agree on the direction.

  • Confirmation: Rising price + rising volume = real deal (like many cars all going the same way).
  • Warning: Rising price + low volume = maybe fake (like only a few cars moving).
  • Spikes: Sudden high volume = something important happened (like traffic jam or open highway).

Real Example: A stock breaking out on high volume is like a traffic light turning green with many cars accelerating - more likely to keep moving.

Pro Tip: Volume is Truth

Price can lie (fake moves happen), but volume usually tells the truth. Always check volume to confirm what price is saying.

Market Cap (Size Matters)

Market Cap = Price × Available Shares. It's like the total value of all cars of a particular model on the road.

  • Size Categories: Large-cap (like trucks) = stable. Small-cap (like sports cars) = faster but riskier.
  • Liquidity: Bigger market cap = easier to buy/sell without moving price (like major highways vs country roads).

Real Example: A $100 stock with 10 million shares = $1 billion company (like 10,000 $100,000 trucks on the road).

Pro Tip: Right Vehicle for the Trip

Choose market caps that match your trading style - big trucks for long hauls, sports cars for quick trips, but mind the potholes!

Time Period Returns (The Scoreboard)

Shows how much an asset gained/lost recently - like a sports team's winning streak.

  • Trend Strength: Green across multiple timeframes = strong winning streak.
  • Momentum: Big percentages = strong moves (like blowout wins).

Real Example: +5% (day), +12% (week), +25% (month) = team on a hot streak!

Pro Tip: Consistency Wins

Like in sports, consistent performance across multiple periods (daily, weekly, monthly) shows real strength, not just luck.

Trending Score (Your GPS)

wave3 combines all these indicators into one easy score (0-100). Higher score = stronger, more reliable trend - like your GPS showing highway vs back roads.

Pro Tip: Follow the Bright Lights

The Heat Map makes it easy - strong green/red and pulsing tiles are like bright highway signs showing the clearest paths.

Multi-Timeframe (The Big Picture)

Checking multiple timeframes is like using both street maps and satellite views. wave3's Trading Styles automatically adjust these for you:

  • Scalping: Like watching the road 10 feet ahead (1-5 min charts)
  • Swing Trading: Like planning a day trip (4hr-daily charts)
  • Position Trading: Like mapping a cross-country journey (weekly+ charts)

Pro Tip: Aligned Timeframes

When daily, weekly, and 4-hour charts all show the same trend direction, it's like having perfect weather, clear roads, and no traffic - the best conditions for your journey.

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