RexDog Trade System FoundationThis indicator contains the foundation indicators used when adopting the RexDog Trading System.
The RexDog Trading System uses simple rules, probability, and key areas of market reaction to reverse engineer momentum within the market. These common rules and reactions are shared across all chart types, markets, and timeframes.
The foundation of the philosophy comes from using simple indicators, probability, and rules to answer the 3 questions of trading:
Where is price coming from?
Where is price going?
How does it want to get there?
* note: you should really be asking the 2nd question first.
This indicator contains the core bias and momentum indicators that provide you an edge when adopting the system.
The general philosophy of the trading system is that there are areas in all markets where momentum will be challenged or confirmed. Using various combined elements of this indicator provides you the general ranges of price where you expect a reaction. A reaction is either a confirmation and continuation of momentum or a stall and reversal of momentum.
Another important element of the trading system is the concept of intention. Using simple rules and the elements of this indicator provide you with a general range of where you will look for the intention of future price action.
Before I describe the components of this indicator and general usage I will mention that I use the term “algo” to define all market participants—all the way from the retail trader, hedge fund, big banks, ETFs, family offices, to secret algorithms in underground bunkers we will never know about.
First up here is what is contained within this indicator:
RexDog Average with ATR bands and Extreme ATR Bands – used to define bias within the market or timeframe
3 Momentum EMAs – these are used to define short term momentum
24/9 Avg – You also have the option of having a 24/9 EMA average and an option of turning off the 24/9 EMAs. This also has a plot color change on 9EMA above 24EMA = purple, 9EMA blow 24EMA = fuchsia
2 Simple Moving Averages – 1 short for momentum confirmation and 1 long for bias confirmation
200 options - Ability to plot the 200 AVG (see line below), 200 SMA, or 200 EMA individually. Also option to plot both the 200 SMA (red) and 200 EMA (green)
200 Avg – This plot is an average of the SMA200 and the EMA200. There is also a plot color change based on EMA above SMA = Green, EMA blow SMA = Red.
vWAP – the standard vWAP is added to the foundation as it plays a dual role of confirming both momentum and bias.
Info Panel – This info panel displays the current price, percentage, and ATR of all indicators in the foundation. It also includes a AVG line as well.
* Info panel is turned off by default
Indictor with Info Panel:
Indicator and Trade System Usage and Tips
Now let’s move onto the value of this indicator, how it is unique, and its usage.
The RexDog Average with ATR Bands and ATR Extreme Bands
The RexDog Average (RDA) is a bias-moving average indicator. The purpose is to provide the overall momentum bias you should have when trading an instrument. It works across all markets and all timeframes.
Usage:
Price above the RexDog AVG = long momentum bias
Price below the RexDog AVG = short momentum bias
Under the Hood:
This is so simple most reading this will discount it. The RexDog Average has been tested across all markets—FOREX, Crypto, Equities, Futures (even tick charts), and even the Penguin population in Antarctica.
The RexDog Average is an average of 6 simple moving averages: 200, 100, 50, 24, 9, 5.
There are 2 ATR bands, one above and one below. Just as with the RexDog Average we take the 6 ATR data points (200, 100, 50, 24, 9, 5). We then create an average by dividing by 6. Then add it to the price.
These ATR bands are also used as high probability reaction points.
Exponential Moving Averages
This indictor contains 3 EMAs that are used primarily for short-term momentum.
Usage of these EMAs are not simple cross signals. While crosses of the EMAs are important and do reveal the general story of the chart and momentum in the trading system they are more used as general areas of reaction points.
If the faster EMAs are below the slower EMA then generally we would refer to the algo as being momentum short. Momentum long would be the reverse.
When you combine the EMAs with the RDA you have both momentum and bias defined or at the very least you have high probability areas where momentum will be checked and a reaction is probable.
Moving Averages
There are 2 moving averages in the system foundation.
The 5 is for short-term momentum and high volatility confirmation. The 200 is the standard 200 used in many trading systems.
The 200 MA/EMA average is used in conjunction with the RDA to confirm market bias. Also, it provides a high probability area of market reaction.
The 200 is represented as the average between the 200 simple moving average and the 200 exponential moving average.
The color change in the 200 AVG is as follows. When the 200EMA is above the 200SMA the average line is green, Red when the 200EMA is below the 200SMA.
vWAP
The standard vWAP is also used in the trade system. As most traders who refer to or use the vWAP in their trading know this indicator provides a general area of market reaction. You will often see a check-in at the vWAP for a continuation or confirmation of momentum. Also if price breaks thru the vWAP you can look at this as a breakdown of momentum and an intention of where price might want to eventually go.
Putting it all Together
Before we put it all together, I should also mention that in the trading system there are only 2 types of trades you will do:
Momentum – trades that align with the momentum of the indicator and timeframe
Fade – trades that are against one or multiple indicators and the timeframe
The general usage of this indicator comes from using these as general areas where you expect price to have a reaction.
It starts with the RDA and defining the probability of bias in the market. The general philosophy here is the market will stay in that momentum state until it doesn’t. If the momentum bias is short and the price closes above the RDA then the momentum would be considered bias long. You’re then looking for follow thru and confirmation on following candles.
With bias defined you can then start to analyze and look for areas of reaction using the other indicators in the foundation.
Simple usage is if price is bias short and below the momentum EMAs you would expect a reaction when price comes up to the general area of the EMAs. Also, if the EMAs are confirming the momentum short the best trade is to trade with momentum.
Usually in the situation where all indicators are pointing to one momentum direction there are opportunities to do fade trades. These fade trades are typically when price is extended away from the key indicators. Your expectation in these trades is that price will snap back to test momentum and have some form of reaction at a key indicator area.
Additional usage is analyzing how all elements of this indicator are positioned from one another. For instance, the further the momentum EMAs get from the RDA provides a larger probability that price will eventually want to come and test the RDA area or a lower or upper ATR band of the RDA.
The information panel provides key data points on helping with this analysis.
In closing:
Simple trading typically works. While this indicator contains what some would consider basic market indicators it’s the rules, philosophy, and probability that provide the edge. When these indicators are combined as one and looked at as a whole to define momentum, reaction, and intention in the market it can provide an edge for answering the 3 key questions in trading.
Rexdogtrading
RexDog Market BiasThe RexDog Market Bias takes the RexDog Foundation Base Indicators and applies weighted rules to provide a single percentage bias result based on the chart and timeframe you are looking at.
This should be combined with the RexDog Foundation.
* Consider this a Beta release with many improvements on the way. Also, realize at this time there are no hard rules on using this indicator-- but if you have a basic understanding of the RexDog System you will immediately see it confirms what you see on the chart. Also it will provide some gut checks when you get used to reading the indicator over time. In our initial beta testing, we've found it incredibly useful at a glance.
Indicator Overview
The base teal line is the bias rating.
On top of that you have the option (on by default) of having the m9, m24, and RexDog Average plotted based on this data point.
From there you have Long and Short bias with key 25% increments highlighted. These appear to be important turning points or momentum check-ins for the algo.
That's right these same highly reliable signals you use within the RexDog Trading System also work on the RexDog Market Bias. The same rules apply.
This is much more than an oscillator. It's combining all the RexDog Foundation and applies some initial smart rules to it. Further versions will build upon this.
General Usage:
Fades - when the market is at extremes these are potential signals for high probability fades
Momentum - when the market is coming from an extreme on a pullback to key levels (25, 50, 75) start to look for momentum entries
Don't argue with the chart. If momentum is over 50% look for confirmation from RexDog Trading Rules. The probability that momentum will continue is high when it's between 50-65%.
More rules to come. Finally, share your own findings in the DEN.
RexDog AverageYes, simple—the RexDog Average is a bias moving average indicator. The purpose is to provide the overall momentum bias you should have when trading an instrument. It works across all markets and all timeframes.
Usage:
Price above the RexDog AVG = long momentum bias
Price below the RexDog AVG = short momentum bias
*Note: we have banned the word “trend” in the RexDog Trading Method.
Additional Usage Advice:
If price rips through the average your momentum bias should probably change. 80% of the time when price moves through the RexDog Average it will come back and test the area around average within 1-2 bars. 20% of the time it does not. The momentum is so strong in that direction so look for a 50-70% tests of the bar that impulse through the RexDog Average.
If you are using the RexDog Trading Method by default if the price is above the average and you are short you are in a fade trade. The momentum trade would be long. Of course reverse if price is below.
On multiple time frames. Of course, one timeframe can be long bias and a lower timeframe can be short bias. Which one do you use? Both—if your in a short trade using lower timeframe and with the bias of the average your in a momentum trade—but on the higher timeframe your aware you are essential fading the overall momentum.
Background:
Rex and I searched high and low for one simple thing. A moving average (or combination of some) that we could use to form our momentum bias that worked for all timeframes and all markets we trade.
We tried and tested them all. Even went down the path of ribbons and various other types of hybrid EMA/MA derivatives. Nothing had a high enough accuracy or mathematically was reliable that we could say with a high probability that it was on the right side of the momentum.
We almost stopped and landed on using the true and tested 200 MA—but we found through extensive tests that using the 200MA or EMA you’re often late to the party. Look you don’t need to be the first one in the trade but having a heads up sure helps.
To quote one of the best financial movies of the modern era—Margin Call:
“There are three ways to make a living in this business: be first, be smarter, or cheat… it sure is a hell of a lot easier to be first”. The RexDog Average used properly enables you to be first or damn near close.
Under the Hood:
This is so simple most reading this will discount it. You might even scoff and berate Rex for wasting your time. But you would be wrong. The RexDog Average has been tested across all markets—FOREX, Crypto, Equities, Futures (even tick charts), and even the Penguin population in Antarctica.
The RexDog Average is an average of 6 simple moving averages: 200, 100, 50, 24, 9, 5.
Yes, that’s it.
The RexDog Average Plus will be released soon with additional parameters and most likely upper and lower bounds. In addition, we are working on a hybrid RexDog Exponential Average.
