Waves are an accurate analogy to describe movements of the markets. Prices decrease and increase in cycles which look similar to waves which are in continual motion: rising up, moving forward, losing their motion and then rising again. We used this analogy to help make our indicator easily understandable to everyone. L&S Waves are made of three things: Blue waves, grey waves and a green and red line. In the middle of L&S Waves dwells a horizontal line. It separates bull and bear territory. Bulls are pushing from below and are trying to move upwards, while bears are pushing downwards. The bigger the waves the stronger the trend and reversal are.
Blue waves are like Deep Water Waves, they come from the depth of the water market. They represent the deep trend of the market. When a blue wave is coming back up it shows that the trend is starting to reverse and that bulls are gaining momentum. On the opposite when a blue wave is starting to collapse, it means that bulls are loosing momentum and that bears are striking back.
Grey waves are like Sea Waves, the ones you see on the beach. They are faster but have less strength. The principle is the same than for Blue Waves, however you will notice that Grey Waves can sometimes show bullish moves while Blue waves are still bearish. This is because Grey waves show shorter term momentum that is not reflected in Blue Waves. For example, this can be a great way to find when you should add to your short position or long position. But because Grey Waves spot shorter term trends, they also lead Blue Waves for trend reversal. When you see a Grey Wave reversing and the Blue Wave follows, the bottom/top is in and it is time to change your position accordingly. If you want to be conservative in your trades, always wait for the Blue and Grey Waves to move in the same direction on high time frames.
The last element of L&S Waves, is a line which switches from green to red. This line tells you who in is power between the bulls and the bears. When the line is red, bears are in control, when it turns green it means that bulls are taking control over the bears. Use this line as a confirmation for the direction of the Blue and Grey Waves, do not get caught in fake out market movements!