The Rainbow Moving Average indicator shows multiple SMA (simple moving averages) all at which is once for a specific time period. The trading strategy of Rainbow Moving Average indicator has already gained quite a lot of popularity among traders. This indicator is very good-looking but it’s not just about the beauty.
How to Attach Rainbow Moving Average Indicator?
If traders want to know more about the indicator, then they can find it in the STUDIES section of Zerodha Kite. They can also use the Kite Mobile App. The Field is close and we can set this value to high or low etc. The default Period is 2, we can set this value also. Check the image below to understand how to attach the Rainbow Moving Average Indicator in HDFC Bank share price chart. You can attach this indicator on to any charts likes daily, weekly, monthly or intraday.
The Rainbow indicator is very efficient and shows good results. Every simple moving average is calculated based on the previous SMA and is color-coded in the chart. Together all the moving averages or MAs thus forms a cloud. The price crossing the MA cloud from below is considered to be bullish and that generates a buy signal. Similarly, when the price crosses the MA cloud from the top it is a bearish sign and triggers a sell signal. Apart from the crossover signals, the MA cloud can also act as a support and resistance and counter-trend bounce trades can be taken when the price retests the moving averages after an initial trend.
The Rainbow MA has been derived from the MetaTrader codes. Being a trend following and lagging indicator, the Rainbow Moving Average Indicator performs well in a trending market. This indicator is likely to generate whipsaws in a rangebound and choppy market. This technical indicator should not be used as a standalone basis. Rather combining with other oscillators can improve the trading performance a lot.
Categories: Technical Indicators