Oracle Trend Direction Forex Trading Strategy

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Oracle Trend Direction Forex Trading Strategy

Trading the forex markets could sometimes be very confusing. Price could go up one moment, then suddenly reverse the next candle. It could seem like its about to start a trend, then it suddenly reverses. At times, signals could seem so clear and candles so strong that it seems impossible for traders not to see where price is going, yet it still reverses.

The markets could be very fickle. It happens most of the time that volatility should not be the exception to the rule. This is because the forex market is traded by people, a lot of people, and people are usually fickle. Market biases could change any moment.

So, how do we make sense of the forex market and understand where it might be going? There are many ways to trade the market. Some traders use Supply and Demand, others use Market Flow, while other use Price Action. Another simple way to trade the market is to look for confluences using reliable technical indicators. It may not be as popular as other methods, but with the right parameters and if used in the right market condition, trading could be made a lot easier.

Oracle Trend Direction Forex Trading Strategy is a strategy that trades on confluences using two reliable indicators. Trade signals produced by these indicators which are perfectly aligned and are in confluence with momentum candlesticks tend to produce good trade setups.

Oracle Direction

Oracle Direction, also called as 100 Pips Trend, is a custom technical indicator which was developed to help traders identify confluences in trend direction, both on the mid-term and short-term trend. This helps traders align trades based on trend and momentum.

This indicator simply plots arrows on a separate window to indicate the direction of the trend. It plots blue arrows pointing up to indicate an uptrend bias, red arrows pointing down to indicate a downtrend bias, and “x” to indicate a market that has an unclear trend bias.

The Oracle Direction indicator has two sets of indications. These two indications should be in confluence in order to confirm that the signal is valid.

Heiken Ashi Smoothed

Heiken Ashi Smoothed is a trend following technical indicator, which is a modified version of the Heiken Ashi Candlesticks.

The basic Heiken Ashi Candlesticks is an indicator which modifies candlesticks by averaging out the open and close of each candle. This creates bars that change color only when the short-term trend has clearly changed. This is useful for identifying short-term trend and momentum reversals.

The Heiken Ashi Smoothed indicators on the other hand is also an average bar. However, it is mainly based on the Exponential Moving Average (EMA) rather that the standard candlesticks. This creates bars that follow price action quite reliably, yet is also very smooth, avoiding false signals coming from market noise.

The Heiken Ashi Smoothed indicator plots bars that change color whenever the trend changes. Lime bars indicate a bullish trend bias, while red bars indicate a bearish trend bias.

Traders can use the Heiken Ashi Smoothed indicator both as a trend filter and a trend reversal signal. Traders can avoid errant trades that go against the trend by filtering out trades that do not align with the trend as indicated by the Heiken Ashi Smoothed indicator. Traders can also use the changing of the color of the bars as an indication that the trend is changing. This can be based on confluences with other signals or based on trend reversal signals that occur on supply and demand zones.

Trading Strategy

Oracle Trend Direction Forex Trading Strategy is a simple trading strategy that trades based on a confluence of trend reversal signals and trend direction coming from the Heiken Ashi Smoothed indicator and the Oracle Direction indicator, both of which are highly reliable trend following indicators.

The Heiken Ashi Smoothed indicator signal will simply be based on the basic changing of the colors of its bars.

The Oracle Direction on the other hand is based on the changing of the direction of the arrows produced. The arrows coming from both sets must be in confluence, pointing the same direction.

Trade signals that occur closely and are aligned with a momentum candle can be considered as a valid trade setup.

Indicators:

  • Heiken_Ashi_Smoothed
  • 100pips Trend

Preferred Time Frames: 15-minute, 30-minute, 1-hour and 4-hour charts

Currency Pairs: FX majors, minors and crosses

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The Heiken Ashi Smoothed bars should change to lime.
  • The Oracle Direction arrows should change to a blue upward pointing arrow.
  • The corresponding candle should have strong momentum.
  • Enter a buy order upon confirmation of these conditions.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as the Heiken Ashi Smoothed bars change red.
  • Close the trade as soon as one of the upward pointing arrows change to either an “x” or a downward pointing arrow.

Oracle Trend Direction Forex Trading Strategy

Oracle Trend Direction Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The Heiken Ashi Smoothed bars should change to red.
  • The Oracle Direction arrows should change to a red downward pointing arrow.
  • The corresponding candle should have strong momentum.
  • Enter a sell order upon confirmation of these conditions.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as the Heiken Ashi Smoothed bars change lime.
  • Close the trade as soon as one of the upward pointing arrows change to either an “x” or an upward pointing arrow.

Oracle Trend Direction Forex Trading Strategy 3

Oracle Trend Direction Forex Trading Strategy 4

Conclusion

This trading strategy, which is based on confluences of high probability indicators, is an excellent trade entry strategy. Traders could use these setups to confirm a trade setup based on either price action, supply and demand or market flow.

As a standalone strategy, it could also be used for breakouts coming from tight ranging periods. Traders could use this as a breakout strategy from a tight ranging day, week or month.

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