The Rainbow MMA MT4 indicator is a trend following indicator that shows several layers of support and resistance, and it can be used for predicting the general market trend. The Rainbow MMA MT4 indicator is composed of several moving averages (see below chart) that follow the price very closely. Generally speaking, when the Rainbow MMA slope is pointing upwards and the moving averages are apart from each other that’s indicative of a strong bullish trend and conversely, when the Rainbow MMA slope is pointing downwards and the moving averages are apart from each other that’s indicative of a strong bearish trend.
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The Rainbow MMA MT4 indicator uses a multitude of Exponential Moving Averages which makes the indicator be more reliable and it’s less lagging behind the price as it has more weight on the immediate price. Since the Rainbow MMA MT4 indicator, it can only indicate the trend direction as well as the strength or the weakness of the trend we need to make use of other tools in order to be able to time the market.
Going forward you are going to learn very simple but very effective strategy using the Rainbow MMA MT4 indicator to spot the trend in combination with the MACD indicator to time the market.
Rainbow MMA MT4 Indicator Trading Rules
As we already explained we need to use other tools for our entry and exit points as the Rainbow MMA MT4 indicator will only show you the trend direction and it really does a good job warning us in advance of a possible change in the trend direction as well as measuring the strength of the trend. Without further ado, these are the rules of the strategy:
- Time Frame: Any time frame, but it’s preferable to use the 15-minute time frame
- Currency Pairs: Any currency pair
- Buy Signal: Rainbow MMA slope indicator needs to point upwards. Secondly, wait for the MACD histogram to cross the zero line from beneath before entering a long position using a protective stop loss 10 pips below the most recent swing low. Take profit once the MACD histogram crosses in the opposite direction
- Sell Signal: Rainbow MMA slope indicator needs to point downwards. Secondly, wait for the MACD histogram to cross the zero line from above before entering a short position using a protective stop loss 10 pips above the most recent swing high. Take profit once the MACD histogram crosses in the opposite direction
Rainbow MMA MT4 Indicator – Long Setup Example on EUR/USD
In the above chart, we have a representation of a long trade setup that shows a cool +125 pips in profit and shows the power of the Rainbow MMA MT4 indicator to predict trends and above all it will keep you in the trend until it’s at the point of reversal.
The the Rainbow MMA MT4 Indicator is a very handy tool that will help you identify the short-term trend in the market as well as possible reversals. Unlike most other trend trading indicators the Rainbow MMA MT4 indicator will keep you on the right side of the market more often than not.
Time Frames
Technically speaking, you can use this indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.
Rainbow MMA MT4 Indicator Download
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Leave us a comment below to let us know your thoughts on this indicator. If you like this indicator, you might like see other indicators that we have carefully selected that will help you in your trading journey.
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