Rainbow Moving Average Indicator Trading Strategy

Rainbow Moving Average Settings

The Rainbow Moving Average indicator shows multiple SMA (simple moving averages) all at once for a particular time period. The trading strategy of the Rainbow Moving Average indicator has already gained quite a lot of popularity among traders. This indicator is quite useful for intraday as well as swing traders. Earlier, we’ve posted articles on Moving Averages. If you want to know about

What are the Key Features of Rainbow Moving Average?

  • By applying the Rainbow Moving Average, traders can avoid the confusion of multiple moving averages.
  • You can use the Rainbow indicator on any timeframe and asset.
  • There are various ways to use the Rainbow. You can use it along with other indicators, or you may draw trendlines to define the buy-sell signals.
  • Setting up the indicator on charting platforms are quite simple and easy in comparison to setting up different MA at a single time.

How to Attach Rainbow Moving Average Indicator on Chart?

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 too 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 the HDFC Bank share price chart. You can attach this indicator on to any charts likes daily, weekly, monthly or intraday.

Rainbow Moving Average Indicator

The next charting platform is Upstox Pro. First, log in to your account, then open any chart there. After opening the chart, open the indicator section. There type down the name of the indicator and click on the apply option.

Rainbow Moving Average Indicator Upstox

What are the Strategies of the Rainbow Moving Average Indicator?

  • Each simple moving average or SMA is calculated based on the previous SMA and is color-coded in the chart.
  • Together with all of the moving averages or MAs thus form a cloud.
  • The price crossing the MA cloud from below is considered to be bullish and that generates a buy signal.
Rainbow Moving Average Indicator
  • 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.
Rainbow Moving Average Indicator support

The next strategy is resistance. As you can see price take resistance and went down.

Resistance

Conclusion:

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.

Author: Ankita Sarkar

Ankita is a graduate in English language and she has also done her MBA from the Calcutta University. She has a high knack in the stock markets. She is a NISM certified Research Analyst. An experienced stock market content writer Ankita is also trading successfully on her own account.

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