Scalping the Rainbow | Forex Factory

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Scalping the Rainbow

  • #1
  • First Post: Edited Aug 8, 2008 3:59pm Aug 4, 2008 1:07pm | Edited Aug 8, 2008 3:59pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Hi everybody, I bumped into some posts on this forum about rainbow trading and nothing was clear how to trade it, so I started my own system. I'm just at the beginning of development of it and I start this tread in hope that others would contribute to it and would be open source, so good ideas would be included and tested and we will have a good solid system. Some software is developed like that and the products are great as is the result of many. ie OpenSolaris, Linux., Firefox ....
I'm getting very good results so far and I'll start to post them.
Here is where the system got so far:

1. EUR 1 min chart with the WMMA Rainbow
2. EUR 5 min chart with WMA(12) and a trend line
3. Determine best time to trade (good volatility). Don't trade at news time; wait 10 -15 min after news.
4. Determine 5 min trend ( ie. trend line up & higher highs & higher lows & price retracts and then passes the first peak (resistance) & price on top of WMA(12) = trend up)
5. On 1 min chart price (thin white line) goes into MA's
6. Take the trade in the direction of the 5 min trend when price comes back from red with 1 mini lot for every $500 in your acct. and SL20, TP10 ; this is a 4% risk because the system has more than 80% wins.
7. Sit back and relax.
Attached File(s)
File Type: tpl XP Rainbow.tpl   17 KB | 20,551 downloads
File Type: tpl 5 min.tpl   < 1 KB | 14,031 downloads
"Money is only a part of wealth" Q.
  • #2
  • Edited 1:35pm Aug 4, 2008 1:20pm | Edited 1:35pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
I traded the GBP today also, with 3 wins 0 losses. It was another signal later on both EUR and GBP, but i didn't take it. I was busy with something else.
Results for today: 6 wins/0 losses, 50 pips, 12 % gain on the acct., $1,200.
I think is not bad for two hours of trading.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 01 Mo Aug04.2008 Trade #3 EUR.jpg Size: 206 KB
Click to Enlarge Name: 01 Mo Aug04.2008 Trade #3 GBP.jpg Size: 205 KB
"Money is only a part of wealth" Q.
  • #3
  • Aug 4, 2008 1:31pm Aug 4, 2008 1:31pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Now I think another good entry would be when the price crosses on the other side of purple, but in the dir of the 5 min trend. That would be an early one, at the reverse of the 1 min trend.
"Money is only a part of wealth" Q.
  • #4
  • Aug 4, 2008 2:09pm Aug 4, 2008 2:09pm
Hi 4xQ, system looks very good.

Could you post your Rainbow indicator?

And, it looks like you are using an EA, Am I right? could you share it?

Could you explain a little bit more step # 6? I don't get it when you say "Take the trade in the direction of the 5 min trend when price comes back from red ..."

Thansk in advance

MaSilva
  • #5
  • Aug 4, 2008 2:32pm Aug 4, 2008 2:32pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Quoting masilva
Hi 4xQ, system looks very good.

Could you post your Rainbow indicator?

And, it looks like you are using an EA, Am I right? could you share it?

Could you explain a little bit more step # 6? I don't get it when you say "Take the trade in the direction of the 5 min trend when price comes back from red ..."

Thansk in advance

MaSilva
Sure. The Rainbow consists of many wheighted MA's (WMMA) indicators. I posted the template in post #1.
This system is not an EA, but maybe we can make one after it is perfected. I trade manually and it takes many hours of screentime to get the good feeling of it.
Step #6
At step #5 you see that the price goes into retracement, and then comes back in the dir of the 1 min trend that has to coincide with the 5 min trend, up or down. The colored lines are MA's.
I'm taking the trade when the price (white thin line) comes out of red (MA's).
Put the template in your template folder under your MT4 folder, right click on the chart and choose template...XP Rainbow...you will understand better.
Cheers, Dan
"Money is only a part of wealth" Q.
  • #6
  • Aug 4, 2008 2:46pm Aug 4, 2008 2:46pm
Quoting 4xq
I traded the GBP today also, with 3 wins 0 losses. It was another signal later on both EUR and GBP, but i didn't take it. I was busy with something else.
Results for today: 6 wins/0 losses, 50 pips, 12 % gain on the acct., $1,200.
I think is not bad for two hours of trading.
Nice system.
I don't understand your trades though.
Look at your 2 lots trade for the price of 1.5581 at 16:42. It closed at 1.5591 at 16:47. My IBFX price was never there. So how did this happen? Maybe I overlooked something? Different broker?
  • #7
  • Edited 3:22pm Aug 4, 2008 3:01pm | Edited 3:22pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Quoting fewhills
Nice system.
I don't understand your trades though.
Look at your 2 lots trade for the price of 1.5581 at 16:42. It closed at 1.5591 at 16:47. My IBFX price was never there. So how did this happen? Maybe I overlooked something? Different broker?
This is a demo acct of FXDD broker. It has a server time of 7 hours ahead of EST (my time). I traded from around 8AM to 10AM. 16:42 is 9:42AM
"Money is only a part of wealth" Q.
  • #8
  • Aug 5, 2008 10:49am Aug 5, 2008 10:49am
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
A long sesion today, and not a very good one.
Here is the cable: 4win/1loss...20pip
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 02 aug05.2008 gbp.gif Size: 33 KB
Click to Enlarge Name: 02 aug05.2008 gbp2.gif Size: 30 KB
"Money is only a part of wealth" Q.
  • #9
  • Aug 5, 2008 11:07am Aug 5, 2008 11:07am
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
I tried the yen today also. 1 trade...10 pips
Attached Image (click to enlarge)
Click to Enlarge Name: 02 tue.aug05.2008 jpy.gif Size: 57 KB
"Money is only a part of wealth" Q.
  • #10
  • Aug 5, 2008 12:00pm Aug 5, 2008 12:00pm
But, still not quite sure I am understanding...let me take a crack here:

If the red MAs rise above all the others, you are waiting for the thin white line to dip back into the MA's? Then, take the trade when it re-emerges?

Thanks
  • #11
  • Edited 12:41pm Aug 5, 2008 12:26pm | Edited 12:41pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Finally, the EUR. I stopped trading as volatility goes down and the market is in a pendant. EUR was bad for me today...in the morning it picked up a bit then went sideways, then again a bit after 11AM and now is going nowhere.
Finally...my last position just closed at target. Trades: 3win/1loss...10 pips on this one today.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 02 tue.aug05.2008 eur1.gif Size: 34 KB
Click to Enlarge Name: 02 tue.aug05.2008 eur2.gif Size: 30 KB
"Money is only a part of wealth" Q.
  • #12
  • Aug 5, 2008 12:33pm Aug 5, 2008 12:33pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Quoting sentinel
But, still not quite sure I am understanding...let me take a crack here:

If the red MAs rise above all the others, you are waiting for the thin white line to dip back into the MA's? Then, take the trade when it re-emerges?

Thanks
Yes, in an uptrend that is already established on the 5 min chart and up on the 1 min.
"Money is only a part of wealth" Q.
  • #13
  • Aug 5, 2008 12:50pm Aug 5, 2008 12:50pm
Bonjour 4xp and thanks to share it with us.

Question about your trade usd/yen
You buy or sell when the red lines comes back so why wait until 16h56 to open usd/yen !?
It was in uptrend before and the red line condition was right many time!?

I maybe misunderstood the system
  • #14
  • Edited 1:57pm Aug 5, 2008 1:01pm | Edited 1:57pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
So 40 pips this sesion...long one...8win/2loss = 80%. I still have problems with the signals before the trend reverses...I made two bad trades today on those...the trends were realy short...volatility low.
One thing would be to use more indicators, but I realy don't want that...the rainbow actualy should tell you all you need.
Anybody got some ideas?
"Money is only a part of wealth" Q.
  • #15
  • Edited 1:49pm Aug 5, 2008 1:19pm | Edited 1:49pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Quoting Thierry89
Bonjour 4xp and thanks to share it with us.

Question about your trade usd/yen
You buy or sell when the red lines comes back so why wait until 16h56 to open usd/yen !?
It was in uptrend before and the red line condition was right many time!?

I maybe misunderstood the system
You're welcome and you didn't misunderstood. You are right, it was a very good signal around 16:00 (9AM EST), but I got the idea to try the yen only later, when I was bored....was no action with EUR and GBP
One thing...the reds are short term MA's...my signals are when the white thin line (that is the price line) comes out from MA lines. You can change the white line into candlesticks with the button on top, but I use the line price.
"Money is only a part of wealth" Q.
  • #16
  • Aug 5, 2008 5:08pm Aug 5, 2008 5:08pm
Why a buy order at 17:44 on gbp/usd (1.9567) ?
Attached Image (click to enlarge)
Click to Enlarge Name: gbp-usd.gif Size: 39 KB
  • #17
  • Aug 5, 2008 5:17pm Aug 5, 2008 5:17pm
A profit of 15 pips might be better than 10 pips but do you think that this benefit would be feasible?

What are your trade hours ?
  • #18
  • Aug 5, 2008 5:31pm Aug 5, 2008 5:31pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Quoting Thierry89
A profit of 15 pips might be better than 10 pips but do you think that this benefit would be feasible?
I was thinking of that, and even more...that would get the risk/reward ratio better than 2:1. Has to be tested. If people would be willing to try different SL TP on different pairs and post it back here would be great. Also each market is different, the range is different.
Initially I started this system for scalping, but I think it can be developed in a second system that would ride the trend, with Trailling Stop or step stop and the exit by some other means.
"Money is only a part of wealth" Q.
  • #19
  • Aug 5, 2008 5:47pm Aug 5, 2008 5:47pm
Your system seems really efficient with all pairs but with a sufficient volatility.

I finally understood your technique 4xq

TP to 10 pips but the SL could be lowered to 15 pips for the pair as eur/usd for example

Your buy order at 17:44 on gbp/usd (1.9567) was a mistake, isn't it !?
  • #20
  • Aug 5, 2008 5:55pm Aug 5, 2008 5:55pm
  •  4xq
  • | Joined Jun 2008 | Status: In This Sign You Shall Conquer | 281 Posts
Thierry, I took that because the price on 1min just came out of the colors from a retracement, the trend on 1min and 5min was up, price was on top of MA(12) and just passed the last peak at 65. It had all my conditions, but turned to be one of the losing trades today because the trend reversed right after that.
As I posted before, I still have problems with the end of trend signals and I need someething to filter that out.
See in the pics....any idea?
Attached Image (click to enlarge)
Click to Enlarge Name: 02 tue.aug05.2008 gbp3.gif Size: 52 KB
"Money is only a part of wealth" Q.
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