When the oscillator is above the overbought band (red lines) and crosses down the signal (dotted line), it is usually a good SELL signal. Similarly, when the oscillator crosses above the signal when below the Oversold band (green lines), it is a good BUY signal.
I have marked some cross-overs in the above chart. As you can see, they are *not* the only useful signals WT generates. Try it on your instrument and let me know what you think.
List of my indicators at Appstore: http://blog.tradingview.com/?p=970
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.
// // @author LazyBear // // If you use this code in its original/modified form, do drop me a note. // study(title="WaveTrend [LazyBear]", shorttitle="WT_LB") n1 = input(10, "Channel Length") n2 = input(21, "Average Length") obLevel1 = input(60, "Over Bought Level 1") obLevel2 = input(53, "Over Bought Level 2") osLevel1 = input(-60, "Over Sold Level 1") osLevel2 = input(-53, "Over Sold Level 2") ap = hlc3 esa = ema(ap, n1) d = ema(abs(ap - esa), n1) ci = (ap - esa) / (0.015 * d) tci = ema(ci, n2) wt1 = tci wt2 = sma(wt1,4) plot(0, color=gray) plot(obLevel1, color=red) plot(osLevel1, color=green) plot(obLevel2, color=red, style=3) plot(osLevel2, color=green, style=3) plot(wt1, color=green) plot(wt2, color=red, style=3) plot(wt1-wt2, color=blue, style=area, transp=80)