Rainbow Charts Metals Analysis & Rainbow Charts Trading Signals
Developed by Mel Widner
This is a metals trend following indicator, similar to the moving averages - it's 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 metals trend, each moving average is applied with a different colors so as to look as a rainbow.
Metals Trading Analysis & Generating Trading Signals
Bullish Metals Trend/ Upwards Metal Trading Trend
When the metals trend in the metal 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 Metals Trading Trend
When the metals 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.
Metal Trend Continuation Signal
As the metals trend continues in one direction up or down, the rainbow charts follow the metals price closely. The more the metals price moves away from the rainbow chart the more the metals trend is likely to continue, this is considered as a metals trend continuation signal. The indicator lines will also continue to expand its width; this is also another metals trend continuation signal.
Metal Trend Reversal Signal
When metals price starts moving towards the rainbow charts then this is seen as a metals trend reversal signal. The width of the indicator lines also contracts signifying a metals trend reversal signal. The reversal Signal is confirmed when the metals price penetrates through all the rainbow charts and the direction of the rainbow charts also reverses in their respective direction.
