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The Elliott Wave Oscillator is a very simple indicator that consists of taking the difference of a 5-period simple moving average and a 34-period simple moving average. The result oscillates above and below the zero line and it is displayed as a histogram whose bar colors changes depending on whether the close price is above the open price or not.
According to Perry Kaufman, author of the book "Trading Systems and Methods", an upward trend is detected when the Elliott Wave Oscillator makes higher highs. A divergence is also a good signal of a change in the direction of the asset. For example, a good sign of a big upward occurs when the Elliott Wave Oscillator is making higher highs while the asset price is making lower lows.
Elliott Wave Oscillator function name is "ElliottOsc". It has no parameters and it can be used as follows:
a = ElliottOsc();
plot(a, "", colorRed, ChartBar, StyleOwnScale);
UpdateColor(close > open, colorBlue);
The above trading formula is very simple. It calculates the Elliott Wave Oscillator, plots it on a chart then instructs the application to change the histogram color to blue when the asset close price is higher than the open price.
Note that the code used in the Elliott Wave Oscillator implementation is simply:
a = sma(close, 5) - sma(close, 35);
