Rainbow Charts Bitcoin Trading Analysis & Rainbow Charts Trading Signals
Developed by Mel Widner
This is a bitcoin trend following indicator, similar to the moving averages - it is drawn using a 2 period simple moving average. 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 and so on. This forms a rainbow shape of the bitcoin trend, each moving average is applied with a different colors so as to look as a rainbow.
Bitcoin Analysis & Generating Trading Signals
Bullish Bitcoin Trading Trend/ Upward BTCUSD Trading Trend
When the bitcoin trend in the btcusd market is Upward/bullish trend, then the rainbow will be moving upward, 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/Downwards Bitcoin Trading Trend
When the bitcoin trend is a bearish downwards then the rainbow charts will be moving downward, the major smoothed line (Violet) will be at the bottom & the least smoothed line (Red) will be at the top.
Bitcoin Trend Continuation Signal
As the bitcoin trend continues in one direction up or down, the rainbow charts follow the bitcoin trading price closely. The more the bitcoin trading price moves away from the rainbow chart the more the bitcoin trend is likely to continue, this is considered as a bitcoin trend continuation signal. The indicator lines will also continue to expand its width; this is also another bitcoin trend continuation signal.
Bitcoin Trend Reversal Signal
When bitcoin trading price starts moving towards the rainbow charts then this is seen as a cryptocurrency trend reversal signal. The width of the indicator lines also contracts signifying a cryptocurrency trend reversal signal. The reversal Signal is confirmed when the bitcoin trading price penetrates through all the rainbow charts and the direction of the rainbow charts also reverses in their respective direction.
