Rainbow Charts CFD Analysis and Rainbow Charts Signals

Developed by Mel Widner

This is a cfd trend following indicator, similar to the moving averages - it is drawn using a 2 period simple moving average. The moving average is then smoothed to create a total of ten moving averages. First moving average is the basis, then the next moving average is calculated using the first one, the third is then calculated using the second one & so on. This forms a rainbow shape of the cfd trend, each moving average is applied with a different colors so as to look as a rainbow.

CFDs Analysis and How to Generate CFDs Signals

Bullish CFDs Trend/ Upward Trend

When the cfd trend in the market is Upward/bullish trend, then the rainbow will be moving upwards, the least smoothed line will be at the top of the indicator, this is the red line and the major smoothed line will be at the bottom of the indicator, this is the violet line.

Bearish Market/Downwards CFDs Trend

When the cfd trend is a bearish downwards then the rainbow charts will be moving downward, the major smoothed line (Violet) will be at the bottom & the least smoothed line (Red) will be at the top.

Trend Continuation Signal

As the cfd trend continues in one direction up or down, the rainbow charts follow the price closely. The more the price moves away from the rainbow chart the more the cfd trend is likely to continue, this is considered as a cfd trend continuation signal. The indicator lines will also continue to expand its width; this is also another trend continuation signal.

Trend Reversal Signal

When price starts moving towards the rainbow charts then this is seen as a cfd trend reversal cfd signal. The width of the indicator lines also contracts signifying a cfd trend reversal cfd signal. The reversal Signal is confirmed when the price penetrates through all the rainbow charts and the direction of the rainbow charts also reverses in their respective direction.