Rex Oscillator

The Rex Oscillator gauges market behavior by comparing the close to the open, high and low values of the same bar. A large difference between a bar’s high and close indicates weakness, while a large difference between the low and close indicates strength. The difference between the open and close price also reflects market performance.

The True Value of a Bar (TVB) indicates the health of the market. A negative close and a positive TVB (or vice versa) indicates that the market is gaining strength on the inverse side of the trend. The Rex oscillator is a period-specific moving average (SMA, EMA, WMA, or SMMA) of the TVB value.

What is the Rex Oscillator?

The Rex Indicator is a momentum following technical indicator that displays momentum indications as an oscillator. Two lines are drawn by this indicator. One line is known as the Rex Line, and it is a jagged line that mimics price action movements. The second line, which is paired with the Rex Line, has a smoother characteristic, similar to a moving average line.

The Rex Indicator employs a complex algorithm to plot the Rex Line. It does, however, resemble how a Relative Strength Index (RSI) line is plotted, though they are not identical. The Signal Line, on the other hand, is simply a moving average of the Rex Line. The method for calculating the Signal Line can be changed to one of several moving average types.

The Rex Oscillator is a moving average of the TVB that indicates market inertia. A reversal is indicated when the Rex Oscillator turns positive in a bearish trend. In a bull market, Rex turning negative indicates a reversal to the downside.

The Moving Average of TVB values is calculated by the Rex Indicator. True Value of Bar (TVB) measures the health of an underlying market. The Rex Oscillator appears in a separate pane beneath the price chart. The signal line is painted Red, while the main oscillator line is painted Green. Both the oscillator and the signal lines oscillate above and below zero. The Rex Indicator can be used on any currency pair, but it works best on time frames of M15 or higher.

Setting up the Rex Indicator
Setting up the Rex Indicator

Rex Oscillator Strategy

The Rex Oscillator Strategy is one that utilizes lines crossovers and divergence. The oscillator generates basic trading signals. A crossover of the main Rex indicator and the signal line can be used to pinpoint buy or sell zones. When the Rex oscillator crosses the signal line from below, it is said to be a bullish crossover, whereas a bearish crossover occurs when the Rex indicator crosses the signal line from above. The center line on the Rex chart represents level 0 (zero). Valid trading signals are generated when the Rex oscillator closes convincingly above or below the center line. A bullish center line crossover occurs when the Rex line rises from below zero to become positive. A bearish center line crossover is charted when the Rex oscillator falls from above zero to negative territory. A bullish divergence occurs when price charts a lower swing low while the Rex indicator moves higher. A bearish divergence occurs when the price prints a higher swing high while the Rex oscillator does not.

Buy Signal

The following could be your checklist for a buy trade:

  • When the asset being traded is in an uptrend.
  • When confluence of a bullish divergence and the crossing of the Rex Line above the Signal Line occurs.

Once these two events occur, you could do the following:

  • Open a buy position after you notice the confluence.
  • Set your stop loss just below the nearest swing low.
  • Set your take profit at the nearest resistance zone or whenever the Rex Line begins to cross below the Signal Line.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Rex Indicator Buy Setup
Rex Indicator Buy Setup

Sell Signal

The following could be your checklist for a sell trade:

  • When the asset being traded is in a downtrend.
  • When confluence of a bearish divergence and the crossing of the Rex Line below the Signal Line occurs.

Once these two events occur, you could do the following:

  • Open a sell position after you notice the confluence.
  • Set your stop loss just above the nearest swing high.
  • Set your take profit at the nearest support zone or whenever the Rex Line begins to cross above the Signal Line.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Rex Indicator Sell Setup
Rex Indicator Sell Setup

Rex Oscillator Pros & Cons

Pros

  • The Rex Indicator is a tool that uses oscillators to provide clear and objective momentum reversal signals.
  • Traders can use this indicator to identify divergences.

Cons

  • Scalpers who trade below the 15 minutes timeframe may experience challenges.
  • This indicator may sometimes present false momentum reversal signals.

Conclusion

The Rex Indicator is a highly customizable technical indicator. Its jagged features are due to its high sensitivity to price movements, but this also makes the indicator susceptible to false momentum reversal signals from time to time. As a result, this indicator should not be used as a stand-alone trade signal, but rather in conjunction with other technical analysis indicators.

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