ma rainbow trading strategy pdf

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Published:: 2008.07.31 08:02
Updated:: 2016.11.22 07:32

Author:

Urbanized Sotensek

A note from the author:

I have been a Forex trader for many years. I still trade sometimes but that happens less frequently now because I grow more and more bored waiting for a reliable signal. The main reason for writing this article is that I do not like to sit at my data processor all daytime. So, my live whitethorn prove reusable. First, I sold my system for three hundred dollars. However, success in Forex is a relative matter, and straight off I decided to pass around my system for free.

Making profit in Forex by and large depends happening a trader (70%) and, to a lesser degree, on his/her system (30%). Therefore, I guess, information technology is non too fair to sell my system, even if it has a high degree of chance. Your achievements on Forex are mostly based on your personality and emotions. You may lose even with the Best system in the world. The arrangement was developed over six months. It is a product of a careful commercialize analysis and requires nobelium improvements or changes. Do not taste to variety any indicators Oregon parameters! Usage it on a demo account for at least two months to get familiar with every indicators and the entire arrangement. Finally, delight note that I am not responsible for any financial losses or gains the information wish bring you. You are entirely creditworthy for everything that happens with your money!

Time scale: 5 minutes
Trading time: From the beginning of the European to the end of the American school term
Recommended currency pairs: USD/JPY, USD/CHF, GBP/USD, EUR/USD, USD/CAD, AUD/USD, EUR/JPY, and Gold

Trend Follower© - Harness the markets by correct timing and attachment to the rules

This is not a "get rich quick" system. You should apply some real efforts to master it. Therefore, trade wind on a present account first. Forex trading involves a high potentiality profit, but also includes a pinched potential jeopardy. You should be aware of the risks and take on them consciously to place well-informed orders. I strongly advise you not to risk the money you cannot yield to lose.

Introduction

Like its refer suggests, Style Follower is a swerve-following organisation. As you know, "trend is your friend". This system will show you what stands behind this saying. Its unqiue approach provides you with safe understanding of market movements allowing you to see the damage apparent motion structure. Following the system rules, you will get a clearer picture of the market.

The system does not try to bode future. Instead, it defines the current trend and allows you to move with the crowd. While mastering the system, you leave expand your horizons because you bequeath need to keep abreast of developments in the economic system and assay to clarify the values of parameters operating theatre experts' opinions. Unlike most other trend-following systems, Drift Follower does non depend on the retiring performance and workings in any marketplace. Its equations are not supported pattern recognition and random selection of indicators, merely rather connected discernment the market and good timing.

Many commercial and free systems consist only of indicators and do not provide clear description of a price bowel movement. They simply presentation a signalise without any explanations. If you arrange not know on the dot what you are doing and why you are doing this, your profits will not be consistent. Trend Follower clearly defines entries and exits providing a trader with the power to explain the reasons for a deal!

System components

First, let's briefly describe all the indicators.

Indicators:

a) Signal arrows
b) MACD
c) Volatility Distribution channel
d) Laguerre
e) Slope Direction line
f) Pivot points
g) Guppy Multiple Moving Averages (GMMA)

Signalize arrows

The signal is generated at the crossover of two exponential function self-propelling averages. Fast EMA is 4, long-playing EMA is 8.

MACD histogram

The default values are used (the system uses 5,35,5):

* Dumb average - 26 days
* Sudden average out - 12 years
* Signal line - 9 day norm from the difference between the slow and the fast ace.
* All averages are exponential.

MACD signals usually jail behind the price. MACD Histogram tries to nullify this issue by measure the distance between MACD and its signal line. Imputable this, the signals alteration before the sane MACD signalize. Still, the histogram should non be used set-apart, therefore we use strange indicators for ratification.

Volatility Channel

This technique measures volatility. It consists of 34 EMAs built by Highs and 34 EMAs built by Lows. IT is non a part of the system, but I the likes of this index number, specially when looking for a confirmation on a larger time scale.

Laguerre

This is an civilised version of RSI. Laguerre converts the signals, so that baritone-frequency components retardation much more that the high-frequency ones. In general, the last bar data has more burden than the previous information, just like the mathematical notation moving common.

Side Direction Line

The gens speaks for itself. The line measures the slope of the trend and its direction. The direction is shown in red for a downtrend and in blue for an uptrend.

Pivot points

Traders consumption pivot points to come up intraday support/resistance levels. The pivot points are delimited by a simple calculation that includes Open, High-level, Low, and Close of the previous solar day of any uncommon asset or index. The terms breaking a extension livelihood/immunity line upward means a buy signal (and vice versa for a sell one). If the prices are higher up the central reference argumentation, the market is bullish. If the prices are infra the line, the market is bearish. The most common right smart of victimization the reference levels is applying them As checkpoints for entering the market, if your other favorite indicators confirm the indicate. Market makers may use swivel points to get the price flying between the levels in order to lure buyers or sellers into performing deals. This can constitute well seen during the low-volume years when prices fluctuate between the calculated points.

There are many methods of calculating pivot points and their support/underground levels. The traditionalistic one is as follows:

* Central pivot point Pin= (H + L + C)/3
* Starting time support = (2 * Pivot) – H
* First resistance = (2 * Pivot) – L
* Indorsement backup = Pivot – (H – L)
* Second resistance = Pivot + (H – L)

In our system, the pivot points are usually wont to exit the market. All calculations are done automatically.

Guppy Multiple Moving Averages GMMA

Guppy MMA is a combination of moving averages optimized to make the picture more smooth and right and avoid sharp peaks drawn by MAs due to sudden market movements.

The nearly common issue of unproblematic MA-based systems is that they become exceedingly inaccurate during matted markets. Besides, they do not provide liquid indications of the existing cu's stage. Is IT going happening or coming to an end? Guppy MMA answers these questions and explains the reasons for entering the Food market, so that you fire improve your trading skills.

The importance of this indicator cannot constitute overstated! Its indications are very reliable. The original Guppy method was created away Darryl Guppy. It consists of 3,5,8,10,12, and 15 EMAs for short-term averages (traders) and 30,35,40,45,50, and 60 EMAs for long-run ones (investors).

The time scale is of little importance Hera. In the Trend Follower system, we habit the index number on M5 charts, however information technology commode be used along new scales – from M1 to MN. In our qualified Rainbow fish method acting, we use 5 colors for various types of traders. When you trade, you should know the main trend, which means that you should equal remindful of what other traders are doing.

1. Old -dannbsp;shortsighted-term traders (mainly catching quick pips, not interested in holding positions)
2. Orange - short-run traders (hold positions a trifle longer than yellow ones)
3. Blue - medium-term traders (mainly swing traders, usually hold positions longer than the late two groups)
4. Fleeceable - semipermanent traders (hold positions longer than the three previous groups)
5. Red - long-terminus traders or investors (hold positions longer than anyone other)

MMAs show relations between short-term traders and investors. Traders (yellow and orange tree ones) examination the reliableness of the main trend. Since they are looking for quick profits, they enter and leave the commercialize speedily. Investors (Marxist and William Green ones) are not so fussy. Still, their support is quite a significant for a trend constitution.

Since you fall out a trend, you volition facial expression for situations when all traders come to a consensus about the market counsel (yellowish, orange, low-spirited, honey oil, and red moving averages). If all traders look in one direction, and so we may speak well-nig a trend. Whatsoever disagreement agency that you do not trade. If you interpret MMA correctly, you backside identify a trend, as well as detect its exhaustion and possible changes. In the main, you trade better.

Breakouts

Even though we hear to avoid breakouts, Guppy MMA can accurately show when they go on. As soon as a breakout occurred and yellow lines crossed the red ones, patc political party ones still stay at a lower place the red lines, we expect the yellow lines to return. This is the point where we can hold for the right moment to open new positions in the direction of a new trend. Please note that you do non open a deal during a prisonbreak, but sole after the price retraces, arsenic indicated by changes in green and red lines' location.

Upward breakouts:

Red lines were above the green ones, when the yellow lines suddenly crossed the red ones upwards. Soon after its rise up, the Mary Leontyne Pric retraced to early lines' level. The green lines are now below the red ones indicating an uptrend.

Downward breakouts:

The red lines were below the green ones indicating an uptrend. But then, the yellowness lines crossed both the green and red ones. As soon A the party lines are on a lower floor the red ones, we are witnessing the downtrend and may wait for signals.

Be alert of the location of the GREEN and RED lines. For an uptrend, the special K lines should constitute ABOVE the red ones, while for a downtrend, the cat valium lines should equal BELOW the red ones.

False breakouts

False breakouts can be easily identified with Guppy MMA. This is one of the many advantages of this indicator. False breakouts tail bruise a trader some materially and emotionally.

If the yellow or orange lines cross the red ones, while the green lines retain the past direction, a breakout is most probably false. If a swerve is genuine, past all lines should re-locate (especially, green and red ones). You should be especially careful when working with volatile pairs, ilk GBP/USD.

Trend Follower rules

ALL criteria should cooccur with at a signal candle surgery the next one! Otherwise, arrange not enter the securities industry! A market entry is performed at the close candle after a point.

Up\Buy

ENTRY: Look for a bespeak up arrow
GUPPY MMA: The green lines should exist above the red ones! The green, red, and yellow lines should consistently point upwards. All lines should move in the same direction!
LAGUERRE: Laguerre line should cross the level 0.15 upwards
MACD: Important! MACD should beryllium above 0 during a signal

STOP Deprivation: 5 points (+spread!) downstairs the current wax light's Humble
ALTERNATIVE STOP LOSS: 20 points on default pairs and 25 points connected many volatile pairs, like GBP and crosses. Choose a diaphragm loss method acting that suits you best
Get out (combined): A half of the situatio can be closed along the first reference point. Hold the remaining part till Slope Direction line turns red
ALTERNATIVE EXIT: Close positions on pivot man points either when Slope Commission line turns red, or when the price (new wax light) opens from the other side of the volatility channel

Down\Trade

ENTRY: Wait for a signal down pat arrow
Rainbow fish MMA: The unripened lines should be below the carmine ones! The commons, reddened, and yellow lines should systematically point downwardly. All lines should move in the same direction!
LAGUERRE: Laguerre short letter should cross the level 0.75 downwardly
MACD: Critical! MACD should constitute infra 0 during a point

Kibosh LOSS: 5 points (+spread!) below the current candle's HIGH
ALTERNATIVE STOP Passing: 20 points happening default pairs and 25 points connected more inconstant pairs, like GBP and crosses. Choose a stoppage loss method that suits you Charles Herbert Best
EXIT (combined): A one-half of the position can follow closed in on the first reference book point. Hold the unexhausted part public treasury Side Direction melodic phras turns blue angel
ALTERNATIVE Croak: Close positions on pivot points either when Slope Direction line turns blue, OR when the price (sunrise candle) opens from the other side of the volatility channel

Afterword

I hope, the product will prove useful..