[blackcat] L1 Mel Widner Rainbow Chart

2021年6月15日

NOTE: Because the originally released script failed to comply with the House Rule in the description, it was banned. After revising and reviewing the description, it is republished again. Please forgive the inconvenience caused.

Level: 1

Background

The Rainbow Charts indicator is a technical analysis tool that follows trend. It helps traders to visualize a full spectrum of trends in the market. Mel Widner developed the indicator and elaborated it in the 1997 issue of Technical Analysis of Stocks and Commodities magazine. It uses 10 simple moving averages and hence, it is a very interesting take on a simple moving average.

Function

The basis of the Rainbow Charts indicator are 10 moving averages. The first Rainbow Moving Average is a 2-period simple moving average. It applies recursive smoothing to this first SMA. The first moving average is the base of nine other simple Rainbow Moving Averages of different lengths. Each SMA bases on the previous SMA. The application of the recursive smoothing enables the indicator to create a full spectrum of the current trends in the market. As we know that the financial markets are full of wonders and surprises and we have an indicator that also surprises us. Yes, it is none other than the Rainbow Charts indicator that presents information on the charts in the form of a rainbow. That is the reason that it is known as the Rainbow Charts indicator.

The interpretation of the Rainbow Charts indicator is quite straightforward. The Rainbow Moving Average with the least recursive smoothing stays at the very top of the Rainbow during a bullish trend in the market. Conversely, the moving average with the most recursive smoothing stays at the bottom of the Rainbow.

On the other hand, the positions of the least and the most smoothed moving averages reverses during a bearish trend in the market. Now the least smoothed moving average stays at the bottom while the most smoothed moving average stays at the top of the Rainbow.

The Rainbow Charts indicator’s moving averages track the uptrend or downtrend in the market. The moving averages track the trend as it progresses and cross each other in a sequential order. The distancing of the price from the Rainbow indicates the continuation of the current market trend. Conversely, if the price moves closer to the Rainbow, it suggests that a potential trend reversal is imminent.


The use of the indicator is also quite simple. Traders should look for initiating a buy position as soon as a strong positive move starts. Similarly, they should look for opening a sell position at the very beginning of a strong negative trend. It is important to note that the angle of the moving averages helps to identify the strength of a trend. The steeper curve suggests a stronger trend and vice versa.

Traders can also use the tool in combination with other technical analysis tools as a trend-following indicator. Traders can enter a buy position when indicators suggest a strong bullish trend. They can initiate a sell position when indicators indicate a bearish trend. Technical analysts and experts always suggest to use the Rainbow Charts indicator in combination with other technical analysis tools for successful trading.

Key Signal

Plot a1~c4 --> 10 Rainbow Moving Averages.

Remarks

This is a Level 1 free and open source indicator.

Feedbacks are appreciated.

16 分前

リリースノート

OVERVIEW

The L1 Mel Widner Rainbow Chart is a custom indicator designed for TradingView that visualizes multiple moving averages in a colorful and intuitive manner. This script plots ten different moving averages of varying lengths, creating a "rainbow" effect on the chart. It also includes features for generating buy and sell signals based on the bandwidth of these moving averages. The indicator is useful for traders who want to analyze market trends and potential entry/exit points using a visual representation of multiple moving averages.

FEATURES

🌈 Plots ten moving averages with distinct colors.
📊 Calculates and displays the bandwidth between the highest and lowest moving averages.
🔄 Generates buy and sell signals based on bandwidth conditions.
🔔 Provides alert conditions for buy and sell signals.
🎨 Customizable price source, smoothing length, and level inputs.
HOW TO USE

Add the Script to Your Chart:

Copy the script code and paste it into the Pine Editor on TradingView.
Click "Add to Chart" to apply the indicator to your selected chart.
Customize Inputs:

Price Source: Select the price source (e.g., close, open, high, low).
Smoothing Length: Set the length for the moving averages.
Level: Choose the level for calculating the bandwidth.
Interpret the Rainbow Chart:

Observe the colored moving averages on the chart.
Look for buy signals when the bandwidth exceeds 50.
Look for sell signals when the bandwidth is below 50.
Set Up Alerts:

Use the provided alert conditions to receive notifications for buy and sell signals.
LIMITATIONS

The script may not perform well in highly volatile or sideways markets.
The effectiveness of the buy/sell signals depends on market conditions and should be used in conjunction with other analysis tools.
The indicator is designed for educational purposes and should not be solely relied upon for trading decisions.
NOTES

The script uses the Simple Moving Average (SMA) for calculating the moving averages.
The bandwidth calculation considers the highest and lowest prices over the specified level.
The indicator is overlayed on the price chart for easy visualization.