AutoWave Fibonacci Pattern Finder

Introduction
AutoWave is a new family of tools from Quote.com that finds Fibonacci price patterns, and suggests patterns that may emerge in the future. AutoWave is open and does nothing in secret. It applies, automatically, a virtual Fibonacci ro!ection tool in as many places as possible on the chart, and reports patterns that match your definition of success.

What AutoWave Can Draw

AutoWave can display three things" 1# e$isting patterns% &# possible future patterns% and '# a ()ig)ag* line that connects and ma+es visible the e$tremes on which patterns are based. ,hese elements can be selected independently by chec+ing bo$es on the first property page"

,hese are e$isting patterns"

,hese are possible future patterns"

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,his is the )ig)ag line"

,he three elements can be combined in one chart.

Configuring AutoWave
Wave Size: The Most Important Setting. ,he single most important setting in AutoWave -- and the thing you will want to tin+er with -- is Wave .i/e. Wave .i/e is a number that defines a high or low price e$treme, by stating the number of surrounding bars on either side that must not be higher or lower than the candidate e$treme. Another way to thin+ of it is" Wave .i/e 0 1 is the minimum distance between e$tremes of the same high or low type.

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Although Wave .i/e is &1 by default, in your e$perimentation please consider reducing it, as well as the number of bars displayed on charts where AutoWave is enabled. .ome very beautiful AutoWave charts have been produced with high Wave .i/es and large numbers of bars. 2ut the process of e$tracting the (big picture* information about the price patterns might be easier if there are fewer bars and smaller wave si/es. lease e$periment and let us +now. The Effect of Changing Wave Size. 2elow, Wave .i/e was set at '1, &1, 11 and 3. 4,he )ig)ag line was turned on to display the e$tremes.#.

Subdividing Wave Size. A chec+bo$ on the property page will cause AutoWave to loo+ for additional e$tremes, in places where there are two e$tremes of the same high or low type ne$t to each other. ,hese points need a name, and we5re calling them 6icro7$tremes.

2oth charts have Wave .i/e 9 &1% on the right, the (subdividing*chec+bo$ is chec+ed.

Choosing Non-Standard ie!ds for "igh and #o$ E%tremes. 2y default, :igh and ;ow fields are used for high and low e$tremes. :owever, you can pic+ from several choices"

,he effect of switching from the :igh<;ow fields can be dramatic. In the first pair of images, the number of patterns was reduced when Avg:;=<Avg:;= were chosen.

,his pair of images shows a net increase in the number of recogni/ed patterns when Avg:;=<Avg:;= are used.

Inc!uding &ff-Screen 'ars in the Ca!cu!ation. 2y default, AutoWave loo+s only at the bars displayed on a chart window. >ou can e$tend that to include bars to left or right, up to 11 screens5 worth. ,his turns out not to be particularly useful, since it5s hard to tell what the added lines mean. )ero and one additional screen worth of lines considered 4left to right#.

Wave (atio Tab!e. ,he Wave ?atio ,able contains numbers that define (desirable* retracement ratios. ,hese are patterns which are thought to correlate well with price reversal.

,he default numbers have simple mathematical relationships to the basic Fibonacci number, 1.@1A. :ere5s a chart that shows how the Wave ?atio table is used when charting a pattern. 7$tremes A, 2, = and B were found !ust by loo+ing at the price data. ,he price distances A2, 2=, and =B were measured, and the ratios calculated. It turns out ratios 2=<A2 and =B<2= are close to a table value, CA.@. 2ecause of that match, the line is drawn. A separate measure of closeness can be used to give labels a special color 4green in both cases below#.

)isp!a*ing +atterns With and Without (eference to the Wave Tab!e 2y default, AutoWave shows only the patterns that come close to one of the table ratios. >ou can disable the Wave ,able by unchec+ing the bo$ below. 4,his would have the same effect as raising the error tolerance to a high number.#

:ere is a chart where filtering was disabled, then enabled.

:ere, filtering was enabled, and the error tolerance changed from 3 to 1 percent. Dote, fewer patterns were found when the error tolerance was lowered.

+attern #abe!ing. attern labels may show either the actual ratio, the nearest Wave ,able ratio, or both. A distinctive bac+ground color can be used when actual and table ratios are very close. .

Ene chart shows actual ratios, the other, table ratios.

,his one shows both.

Projected (Future) Patterns

ro!ected patterns are enabled by clic+ing a chec+bo$ on the main property page.

ro!ected patterns are built by finding what future price levels would create a three-point retracement pattern, when combined with two e$isting e$tremes and a ratio from the Wave ?atio ,able. ,he two green lines below reach the right margin at a price level that would e$actly complete the 'A.& and 31.1 retracement patterns.

,inds of +atterns: -scending and )escending. Ascending patterns are those whose right leg is ascending, and which may predict another high and subseGuent reversal downward. Bescending patterns are those whose right leg is descending, and may predict a low and reversal upward. "ot .one. ,he :ot )one is a price interval surrounding the rightmost chart price, within which AutoWave will display both pro!ected highs and lows. Above the :ot )one, only potential tops will be shown, and below, only potential bottoms.

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,he :ot )one interval can be reduced to nothing by setting its bar count to 1. 7ffectively, the /one will then consist of the rightmost chart price only, and there will be no interval around it in which both high and low pro!ections are shown. ,he :ot )one interval can also be e$panded by raising its bar count, so that a larger number of potential tops and bottoms will be drawn in the same price range. When ma+ing that change, you should also increase the number of pro!ections that can be drawn, from its default in the range of 3. (estricting the number of +ro/ected +atterns. ,his preference puts an absolute limit on the number of pro!ections radiating from a single e$treme.

(estricting the )istance of +ro/ections from the #ast +rice. ,his setting controls how far away the pro!ections may be, as a function of the vertical distance between the leftmost two e$tremes that define the swing. ,he default value of 311 would allow Wave ?atio ,able entries under 311 to be pro!ected.

A value of 311 means that the farthest-out pro!ected price level would be one that is as far from the :ot )one in price, as are the e$isting high and low e$treme. ,his would normally allow Wave ,able ratios as highas 311 to be shown.

#imiting the number of +ro/ections b* editing the Wave (atio Tab!e. ,he table probably contains levels you don5t consider significant. Bisable a bunch of those and the number of pro!ections will be reduced. 6y own candidates for unchec+ing" &' and 31. When you remove entries, a compensating change would be to increase the 7rror ,olerance setting from 3 to 11 maybe more. 11

(ep!a*ing the "istor* of +ro/ected +atterns. 2ecause pro!ected patterns normally consider only the bars on screen, you can replay most the pro!ections you would have seen in the past, and see how they evolved. ,he mouse thumbwheel and +eyboard left and right arrow +eys are well suited to this. When the mar+et is open, some patterns come and go Guic+ly as the ;ast price shown on the chart moves. 6ost of those rapid changes are suppressed by +eeping the :ot )one set to one or more bars, and not overly restricting the number of allowed pro!ections. (eserving Space on the Chart for +rice +ro/ections. >ou can modify the Auto .cale behavior so that a little e$tra margin is available at top and bottom of a chart, to hold price pro!ections. ,his number is a multiple of the price range of the stoc+, and isn5t affected by the pro!ected levels themselves.

:ere are images where this setting was turned off, then turned on and set to 'H.

How Settings are Stored

7ach AutoWave study wor+s independently% its settings can be varied without affecting any other. An AutoWave study becomes part of the chart that contains it% its settings are stored with the chart, and in the wor+space that contains the chart. 0 actor* )efau!t1 Settings. Q=harts contains in it a hard-coded set of preferences that will be used for newly created studies, unless you have created customi/ed preferences of your own. =lic+ the Ise Factory Befaults button to apply them. 1&

2ser-)efined )efau!t Settings. At any time you can save the current study5s preferences, and ma+e them the default for new studies, by pressing the (.ave As Befault* button. Befault settings are written into a file called AutoWave.ettings.dat, in the ;ayouts directory. Befault settings, if they e$ist, are used instead of Factory Befaults when a new study is created. AutoWave.ettings.dat is read when Q=harts starts. If you5d li+e to remove the customi/ed settings, do either of these things" 1# stop Q=harts, then delete AutoWave.ettings.dat. Er, &# Jisit the main studies property dialog, AutoWave tab, and press (Ise Factory Befaults*" ,his will copy the Factory Befaults into AutoWave.ettings.dat. All chart settings, including the studies it contains, are can be stored in a default layout file and automatically be added to any new chart. Ise the ;ayout < .et Befault option on a chart5s popup menu.

Mu ti! e Instances of AutoWave

>ou could, if you want, have multiple independent instances of AutoWave active on a single chart. :owever, only the first, topmost study in the list can be accessed via the button on the .tudies Quic+bar. All AutoWave study instances can be created, edited and deleted in the same way other Q=harts studies are" from the .tudies menu. :ere is a section of the main .tudies menu, which becomes active whenever a chart window receives a mouse clic+. ,he chec+ ne$t to AutoWave .tudy means there is at least one AutoWave study present in the chart.

If you clic+ on the AutoWave menu item above, the following dialo will appear. It lets you edit, add or delete any AutoWave study.

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,he numbers for the highlighted entry mean Wave.i/e is 3, :igh<;ow are the fields used to define e$tremes, and the study is hidden.

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Pro!ert" Pages

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A!!endi#$ %sing &onstandard Co ors

,o use a nonstandard color in AutoWave or anywhere else in Q=harts, open a color dropdown list, scroll to the bottom, and pic+ (6ore*.

,o use one of the e$tended set of basic colors, clic+ on it, then on (EK.* ,o define a custom color, do this" =lic+ on one of the custom color bo$es, and then on a basic color bo$, and then on (Befine =ustom =olors*. ,he dialog will then e$pand to the right, displaying a rainbow-li+e region and a thin colored vertical strip. 6ove the mouse into the rainbow-li+e region and clic+ to choose a hue and saturation. ,hen, slide the mouse with left button down inside the vertical strip to change luminance, ma+ing the chosen color lighter or dar+er. ,hen press (Add to =ustom =olors*, and (EK*.

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A!!endi#$ 'a er" of I(ages

:ere, without much comment, are images recently ta+en with AutoWave. ,hey show some of the patterns one can find, with and without price pro!ection. ,imeframes range from wee+ly to 1 minute.

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