The Wave for ThinkorSwim® www.SimplerOptions.com
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Table of Contents 1 Installing the the Indicator................. Indicator.......................... ...................... .......................... .......................... .......................... .................. ..... 2 2 What Is the TTM Combo Wave................... Wave................................ .......................... .......................... ......................... ............3-4 3-4 3 Using the TTM Combo Wave …….....…………………………………………….........4-5 4 Inputs……………………………………….……………………………………………..……6
The risk of loss in trading can be substantial and may not be suitable for all investors.
1. Installing the Indicator The indicator is installed on the platform already. ThinkorSwim has licensed the use of the indicator, and there is nothing extra you need to do to install it.
To add the indicator to your charts, click Studies>Add Study>John Carter’s Studies>TTM Squeeze
The risk of loss in trading can be substantial and may not be suitable for all investors.
2. What is the TTM Wave? The TTM Wave was built by a third party developer from an algorithm comprised of various moving averages and oscillators. It is a condensed version of the traditional TTM ABC Waves. The idea behind the waves is to visualize the overall strength and direction of a given market across multiple time frames. There are 2 separate waves that make up the Combo Wave. The “A Wave” measures short term relative strength and direction of a market while the “C Wave” measures the longer term strength and direction. In the image below, the shorter term A Wave (referred to as Wave 1 in the indicator settings) is plotted in red/yellow. The longer term C Wave (Wave 2 in the indicator settings) is plotted in cyan/blue. The two waves are overlaid to show the correlation between the two and also to conserve chart space in your trading platform.
The risk of loss in trading can be substantial and may not be suitable for all investors.
3. Using the TTM Wave Indicator To use the TTM Wave indicator, right click on a chart and select Add Study>John Carter’s Studies>TTM Wave and this indicator will appear on your chart. The chart below is an example of a nice trade setup using the waves. Notice how both the A and C Waves crossed the zero line to go negative just after 11:30am CT. This represents both short term and long term market strength weakening and a shift to a down trending market. Both waves remained negative for the duration of the trading session as the stock continued to sell off. The small pullback between 1:00pm and 1:30pm CT did not shake you out of the short position since both waves remained negative and signaled a market that remained bearish.
For intraday entries, the shorter term A Wave is commonly used as an entry signal. Once the wave crosses above or below the zero line, this is often used as an entry signal in the corresponding direction. For the highest probability setups, we like to see the C Wave on the same side of the zero line. For example, if the A Wave crosses zero going from negative to positive, we would avoid taking a long entry if the C Wave was negative and therefore not in agreement in regard to market trend. The risk of loss in trading can be substantial and may not be suitable for all investors.
The C Wave (plotted in blue; Wave 2 in the indicator settings) is often viewed as the “anchor” for the market. If this wave is clearly positive with all bars above the zero line, we would avoid short trades as this is an indication that the overall momentum of the market is long. The opposite would also be true if the wave was clearly negative. The TTM Combo Wave also works nicely as a confirmation for the TTM Squeeze indicator. When a squeeze fires, we want to see that the A and C Waves are in agreement with the direction of the signal. If a squeeze fires short but the waves are clearly positive and showing bullish momentum, we may opt not to take the signal since it would be fighting the overall market trend. Conversely, when the A and C Wave components of the TTM Combo Wave are negative and reflecting bearish sentiment, we would only be interested in short signals from the TTM Squeeze or other entry-based indicators.
The risk of loss in trading can be substantial and may not be suitable for all investors.
4. Settings
Wave1 tab – Displays settings for the A wave Wave2High tab – Displays the settings for the faster C wave. Wave2Low – Displays the settings for the slower C wave. You can break apart the waves and display them separately on the chart by unchecking the “Show Plot” field for the wave1, adding the indicator to you charts again and then unchecking the “Show Plot” field for both the Wave2High and Wave2Low tabs.
The risk of loss in trading can be substantial and may not be suitable for all investors.
