Rainbow Moving Average System working in the Stocks and Commodities Markets. It is a colorful display of fourteen smoothed moving averages. A moving average is considered a trend indicator. The user may change the input (close), method (SMA), period length and colors. Rainbow indicator is quite popular among Forex traders to help identify trends, retracements, and sideways market. Though, it’s nothing special.
You can use it for short-term, medium-term and long term trading. I heard it makes a great companion for scalping along with a momentum indicator or oscillator. Similar to using a single or double MAs, when the stock is trading above the rainbow then we assume it’s trading in an uptrend. When the candles are below the rainbow then it’s bearish.
A few examples of what the Rainbow Moving Average System looks like: