The Rainbow forex indicator is an mt4 technical indicator with seven moving averages(ma) to make a rainbow of forex support or resistance. This rainbow act as a chart support or resistance zone. 

Moving averages determine the trend’s direction and find the dynamic support or resistance levels. Price respects the moving averages. 

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How does the rainbow mt4 indicator work?

The moving averages(MA) are used to find the primary key levels on the mt4 chart. But sometimes, they need help to give exact chart reversal points. That’s why there is a mix of seven moving averages in rainbow forex indicators that are all used to see key reversal levels on the chart. 

These seven moving averages(MA) make a wide zone. This expansive zone act as a chart support or resistance level. 

Price bounces from the forex rainbow of moving averages(MA). After the breakout of the rainbow, a chart price trend reversal occurs. The price trend changes. 

  • If the price breaks the forex rainbow of moving averages with a big bullish chart candlestick breaching through all the moving averages, the chart price trend changes from bearish to bullish.
  • Conversely, if the price breaks the forex rainbow with a big bearish chart candlestick breaching through all the moving averages, the price trend changes from bullish into bearish.

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Types of moving averages used in rainbow forex indicator

Seven moving averages with different periods are used in the rainbow indicator. You can also change the period according to the requirements. But we recommend you use the moving averages from low to high in the following periods.

  • 9 Period
  • 16 Period
  • 21 Period
  • 35 Period
  • 41 Period
  • 55 Period
  • 61 Period

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These are recommended moving averages to make a rainbow of moving averages. You can assign different colors depending on the strength of each moving average. 

Rainbow indicator signals in mt4

Buy signal

When a big bullish candlestick breaches through the seven moving averages and closes above the MAs, it shows a buy signal. It would help if you stayed in the long direction until a price breaks the 61 Period moving average in the opposite direction. 

Sell signal

When a significant bearish candlestick breaches through the seven moving averages and closes below, it shows a sell signal. Keep holding a sell position until a breakout of 61 periods moving average does not happen in the opposite direction. 

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Conclusion

The Rainbow in mt4 is the best and most simplistic indicator for newbie traders. It can also generate profits in the forex market if traded with other confluences like chart patterns or trading indicators. 

Use candlestick patterns to get high accuracy and winning signals with a rainbow indicator.

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