Rainbow MA Forex Day Trading Strategy aims to allow traders to wait for pullbacks in an area called Rainbow MA. First, we need to determine if we're in a trending or beginning trend.
There are a few rules that can be used to identify a trend. The Rainbow MA must agree with the intermediate trend, which is the 50-period Exponential moving average (EMA). It should be on the right side of the 50 EMA. The price should then be moving in the opposite direction to the Rainbow MA. The Rainbow MA should also be pulling away from the trend. It would then have a tendency for the price to fan out. We wait for the pullback.
It will be easy to pullback and enter. The price will pullback once it is within the Rainbow MA. Once it has closed, we will wait for it exiting and move in the direction of the trend. This is the start of the trend. This is when we push the trigger and the price will rise.
The Rainbow MA is a custom indicator that uses a moving average to show multiple lines. These lines can be easily identified because they tend to form a fan in a market that is trending. Pullbacks are minor reversions of the average price. The Rainbow MA area becomes a great area to price pullback to. If a trend is strong enough to continue its current direction, it will pullback immediately. The Rainbow MA is a powerful tool for identifying entry points in market conditions that are trending.
Indicators:
RainbowMMA_09 (Sky Blue)
RainbowMMA_10 (Gold)
50 EMA (Magenta)
Timeframe: 5m chart
Currency Pair: any
Try the Rainbow MA Forex Day Trading Strategy with AtoZ Markets approved forex brokers:
How to trade with Rainbow MA Forex Day Trading Strategy?
Buy (Long) Trade Setup Rules
Entry
- Rainbow MAs should not be lower than 50 EMA
- The Rainbow MAs should be considered the price.
- Rainbow MAs are to be admired.
- Wait for the price to be retraced and then close within Rainbow MAs
- As soon as the price is back above the Rainbow MAs, you can place a buy-market order
- Place the stop loss at the lower end of the entry candle
Exit
- As soon as the price moves back, close the trade and it is within the Rainbow MAs
Sell (Short) Trade Setup Rules
Entry
- Rainbow MAs should not exceed 50 EMA
- The Rainbow MAs should be considered the price point.
- Rainbow MAs are to be admired.
- Wait for the price to be retraced and then close within Rainbow MAs
- As soon as the price is back below the Rainbow MAs, you can place a sell order
Stop Loss
- Place the stop loss at the top of the entry candle.
Exit
- As soon as the price moves back, close the trade and it is within the Rainbow MAs
How to download and install an indicator?
In order to install the indicator on your MT4 platform, you need to follow these steps:
- Click on the “Download Indicator” button located at the bottom of the screen.
- Save the file to your computer.
- Extract and move the files into the MT4>Indicator folder of the MetaTrader4 software file directory.
- Restart your Metatrader platform.
- Navigate to “Indicators.”
- And select the “Rainbow MA Forex Day Trading Strategy” template to apply it on the chart.
Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.
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