Rainbow Charts Gold Trading Analysis & Rainbow Charts Trading Signals
Developed by Mel Widner
This is a gold trend following indicator, similar to the moving averages - it's drawn using a 2 period simple moving average. 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 and so on. This forms a rainbow shape of the gold trend, each moving average is applied with a different colors so as to look as a rainbow.
XAUUSD Trading Analysis & Generating Trading Signals
Bullish XAUUSD Trading Trend/ Upwards Gold Trading Trend
When the gold trend in the xauusd 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 XAUUSD Trading Trend
When the gold trend is a bearish downward then the rainbow charts will be heading downward, the major smoothed line (Violet) will be at the bottom and the least smoothed line (Red) will be at the top.
XAUUSD Trend Continuation Signal
As the gold trend continues in one direction up or down, the rainbow charts follow the xauusd trading price closely. The more the xauusd trading price moves away from the rainbow chart the more the gold trend is likely to continue, this is considered as a gold trend continuation signal. The indicator lines will also continue to expand its width; this is also another gold trend continuation signal.
XAUUSD Trend Reversal Signal
When xauusd trading price starts moving towards the rainbow charts then this is seen as a gold trend reversal signal. The width of the indicator lines also contracts signifying a gold 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.
