Wolfe Wave

Wolfe Waves are a natural trading pattern discovered by Bill Wolfe that appears in all financial markets and timeframes. The pattern consists of five waves that form a wedge or channel shape, with specific structural rules: waves 1-2 form the base, wave 3 extends beyond wave 1, wave 4 stays within the range of waves 1-2, and wave 5 extends beyond the trendline drawn through waves 1 and 3. The key feature of Wolfe Waves is the Estimated Price at Arrival (EPA) line — drawn from wave 1 through wave 4, this line projects the target price and approximate time of the reversal after wave 5 completes. The pattern works on the principle that price naturally oscillates around an equilibrium, and extended moves beyond the channel must be corrected. Bullish Wolfe Waves form in a falling wedge pattern (wave 5 makes a final low, then price reverses upward), while bearish Wolfe Waves form in a rising wedge (wave 5 makes a final high, then price reverses downward). The pattern is considered more reliable when the five waves are clearly defined and the EPA line converges at a reasonable angle.