Rainbow Charts EA Setup - Setting Up Rainbow Charts Expert Advisor

Rainbow Charts EA Setup - Setting Up Rainbow Charts EA - A trader can come up with an Rainbow Charts EA based on the Rainbow Charts indicator explained below.

Rainbow Charts EA rules can be combined with other Forex trading indicators to come up with other Expert Advisor Forex Robots that trade using rules based on two or more indicators combined to form a trading system.

Rainbow Charts Forex Trading Technical Analysis & Rainbow Charts Signals

Developed by Mel Widner

This is a trend following indicator, similar to the moving averages - it is plotted using a 2 period simple moving average. The moving average is then smoothed to create a total of ten moving averages. The 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 and so on. This forms a rainbow shape of the currency trend, each moving average is applied with a different colors so as to look as a rainbow.

Rainbow Charts EA Setup

Forex Trading Technical Analysis & How to Generate Trading Signals

Bullish Forex Trend/ Upwards FX Trading Trend

When the trend in the forex 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/Downward Forex Trading Trend

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

Bullish Signal and Bearish Signal - Forex Rainbow Charts EA Setup

FX Trading Trend Continuation Signal

As the 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 trend is likely to continue, this is considered as a trend continuation signal. The indicator lines will also continue to expand its width; this is also another trend continuation signal.

FX Trading Trend Reversal Signal

When price starts moving towards the rainbow charts then this is seen as a trend reversal signal. The width of the indicator lines also contracts signifying a trend reversal 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.