Oracle Re-Entry Forex Trading Strategy

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Oracle Re-Entry Forex Trading Strategy

Many strategies are geared towards catching the beginning of the trend and exiting before the trend dies out. This is all well and good, but there are just times when the market trends for too long and those whose strategies revolve around entering at the beginning of the trend would find themselves having no opportunity to join the market and make money out of it. What we need in addition to our usual trend reversal strategies is a trend re-entry strategy. This would allow us to make money from an already established trending market condition.

Crossover Strategies versus Trend Re-Entry

Perhaps one of the most popular trend reversal strategies are the crossover type of strategies. These are strategies that determine trends reversals by having some sort of moving average or other custom indicators crossover on the price chart. Entries and even exits are usually determined by the crossovers of the lines drawn by the indicators. Much like the one shown below.

As you would notice, although crossover strategies don’t always work 100%, they do seem effective in catching trends from start to finish. However, those who weren’t able to join the market early on, or were prematurely stopped out, don’t have another opportunity to join the market if purely based on crossover strategies. But there are ways to re-enter the market, while still using the same moving average or other similar custom indicators.

Trends often have several contractions that offer opportunities for re-entries, and the same indicators used for crossovers are excellent for identifying contractions and resumptions of trend direction.

If you would notice, there are phases during the trend when price would either contract and move sideways for a little while, or better yet retrace towards the indicator lines. These contraction phases or retracements are excellent opportunities to re-enter the market. This is because, usually right after this phase, is the expansion phase, where price could rapidly explode with a bias toward the direction of the trend.

Strategy Concept

In this strategy, we will be using the Oracle set of indicators to identify trending market re-entries. These indicators include the Oracle Move, Oracle Strength, and Oracle Direction indicators.

The Oracle Move indicator tends to identify the trend of the market, whether it is bullish or bearish. The same goes with the Oracle Direction. It also tends to identify on a micro level, whether the market is still trending or not, and conveniently points the direction of the trend. Lastly, the Oracle Strength indicator measures the momentum of the trend. Its concern is not only the direction of the trend, but also if the trend has strength to push further.

What we will be looking for is for all three to be in confluence, pointing the same direction. Having all three indicators agree with each other increases the probability that the trade setup would work.

But we are not to enter all available trades based on if all three are in confluence. This would mean we will be chasing price, and that is a recipe for disaster.

Instead, we will be waiting for the market to contract, or better yet retrace to a better price. We will be identifying retracements or contractions as candles with bodies or bars at the wrong side of the blue Oracle Move line, while the Oracle Move line still hasn’t crossed-over indicating a reversal. On a bullish trend, this will be a close below the blue Oracle Move line. On a bearish trend, it will be a close above the blue Oracle Move line. Usually, this will be accompanied by having either the Oracle Strength or Oracle Direction indicator printing yellow histogram bars or “Xs”. This indicates that the trend is still in a pause.

Then, we wait for a signal that the trend has resumed. This will be when all three indicators are in confluence and price closes back on the right side of the blue Oracle Move line.

Timeframe: any

Currency Pair: any except on 5-minute timeframe and lower, use GBP/USD and EUR/USD instead

Session: any except on 5-minute timeframe and lower, trade on London and New York sessions instead

Buy Trade Setup

Entry

  • The blue Oracle Move line is above the red Oracle Move line indicating a bullish trend
  • Retracement: part of the candle’s body is below the blue Oracle Move line
  • Resumption of bullish trend: price close back above the blue Oracle Move line
  • Oracle Strength: histogram is blue
  • Oracle Direction: blue arrow pointing up

Stop Loss

  • Set the stop loss at the low of the candle or below the Oracle Move indicator lines

Take Profit

  • Set the take profit target at 2x the risk on the stop loss

This is an example of a buy trade setup that worked. Price retraced for a couple of candles prior to our entry. On those two candles, the Oracle Strength indicator also turned yellow indicating a pause of the trend’s strength. Then, on our re-entry, everything lined up for a profit.

Buy Trade Setup

Entry

  • The blue Oracle Move line is below the red Oracle Move line indicating a bearish trend
  • Retracement: part of the candle’s body is above the blue Oracle Move line
  • Resumption of bearish trend: price close back below the blue Oracle Move line
  • Oracle Strength: histogram is red
  • Oracle Direction: red arrow pointing down

Stop Loss

  • Set the stop loss at the high of the candle or above the Oracle Move indicator lines

Take Profit

  • Set the take profit target at 2x the risk on the stop loss

On this sample of a sell trade setup, although price didn’t close above the blue Oracle Move line, the open of the candle was above it, causing part of its body to be above the blue Oracle Move line. Also, the two bullish candles that has wicks on above the body are indicative of a retracement, with price above the candle being rejected by the market. This time it is the Oracle Direction indicator that printed a yellow
“x” mark prior to the entry. After the retracement, a strong candle closing below the blue Oracle Move line was printed in confluence with all the other Oracle indicators. This trade setup was also profitable.

Conclusion

Trend reversal strategies are not the only ways to earn from the market. Seeing a trend run while you are not riding it is not the end of the world. You could still re-enter the market using the same indicators but looking for a different market condition. Instead of a reversal prior to a trend, look for a contraction or retracement prior to a market expansion going the direction of the trend.

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