Scalping the Rainbow

@Ninja...I can see you use big lot sizes, what is your risk/reward ration (how big your stop loss is)? For me it is interesting to see such trade model (small pips with big lots), you must have heavy confidence on such trades and congrats on that. I also plan to go similar way, but will stay at 2-3lots max too keep liqudity.

Hi, I see that you joined back in 2008 and you have had a busy past 6 months just trying out a lot of different trading systems, I have been in your shoes and have done the same in the past. It is a matter of finding what fits/suits you best. Just like cigarguy's reply to you, there is an element to trading that can't be explained but comes with many years of trading experience.

You need to learn to read Price Action.

Next come the intangibles , first you have got to develop a so called third eye (intuition). Second is discretion meaning to know when to take or disregard a trade signal. Last is active trade management skills which is key to this kind of low time frame trading (M5).

There is more to my trades than just when below the rainbow you sell and when above you buy.

My criteria are as following but this is only 70% of trading my trading process the rest was mentioned above.

1.) Look at currency strength meter and try to trade the weakest against the strongest currency if the spread isn't too high. It is best when EUR is at the bottom and JPY at the top or vice versa.

2.) You have got to know the average session range for the traded pair and its tendencies (personality).

3.) Price needs to be below the the rainbow and all the rainbow colors need to be in the exact following order meaning for a buy the order must be white, purple, blue,green,yellow and red meaning they need to be stacked on top of one another this way and vice versa for a sell.

4.) H1 and H4 need to be both red for a sell and green for a buy.

5.) The multimeter indicator on the very top right needs to be almost all red for a sell at least from M1-H4 and green for a buy. The more the same color the better.

6.) On the bottom window the TMS-Matrix 4TF indicator at least top three rows need to be red for a sell and blue for a buy.

7.) Price needs to in the process of making a hook (U-turn) and coming out of the rainbow.

8.) Read Price Action, no traffic ahead (Support or resistance, Round number) and price is making a lower high, lower low for a sell and a lower high, higher low for a buy. I also have a plain M5 chart open at the same time to see these thing easier.

9.) No immediate upcoming News.

10.) Fundamental knowledge and understanding of what is happening currently in the market.

There are a few more concepts such as when the rainbow rolls over but they are a little lower probability setups.

Not So Simple After All.

You follow all the above steps and you are going to be near breakeven. The other 30% trading decision process is what takes you to the next level (profit).

I studied all of cigarguy's trades in this thread and the other 2 threads and then spent a lot of time and found all his indicators on my own.

The indicators you asked for are the following: The H1 and H4 indicator is called UFX Trend multiMeter. The round number indicator is called SweetSpotsGold...... Both of these indicators have been posted on many occasions in one of the threads that you have visited in the past in the commercial section

I also trade a few other methods as well, once you acquire that intangible 30% part of trading plus Price Action reading skills then you can trade any robust trading system and TF with ease.

Some of my posted trades don't follow all the criteria points to the T but experience allows me too bend a few of them because Price Action is first and then indicators

Nice criteria! I'm also a fan of using the H4 and H1 Candle to determine the preferred direction for entries, plus I use the Daily Candle but with some currencies and in some markets the Daily Candle can change color as well.

Have you used ATR projections or Pivots at all? How about the Center of Gravity indicator?

Very good question Mares. The answer falls in that 30% part. Just like cigarguy, I employ an emergency hard SL which varies depending on the traded pair and I close a trade before it reaches it. My TP is dynamic meaning that I actively mange my trades and move my SL to BE after I am in profit by X many pips depending on the traded pair. A fixed 10 pips SL and TP won't work here.

As cigarguy has expertly explained we are looking to go with the momentum, fast in fast out.

Please keep in mind that aiming for short distances with big/heavy lots is very risky and requires a lot of experience and flexibility and it is not advised for those who are new to trading.

I employ a form of pivots and ADR in trading a HTF strategy. I have looked at Center of Gravity indicator briefly but don't use it.

UJ short trade, +80.0 pips ( 8 lots at +10.0 pips).

Hi Ninja, thanks for reply. Could you tell me what is your average time per trade (how long it takes when you enter position and close it)?

I am trying to be in shortest possible, and my positions last usually between 2-5minutes, sometimes goes up to 15mins.

All trades that goes beyond 15-20minutes I consider as fails even they end up with profit (because they did not end up at t/p level within my personal projected timeframe) .

You are welcome Mares, I agree with you to a certain extent regrading time spent in a trade, I don't sit and wait forever until I get to a predefined profit target since my TP is dynamic anyway. When trading big lots and going for short distances (small pips) I constantly monitor and manage my ongoing trade(s) .

As far as considering a trade closed for a profit a fail because it took to long, that is too strict for me. Profit is profit in this business.

As of now, I prefer to trade this method during less volatile times and I start looking for trades about 2 hours before LO since the moves are a little slower and as a result I am a little more patient with my trades. I started late today.

The indicators on my chart are there for a reason, they help me see the market sentiment change and I may close a trade for a few pips in the +/- based on them but I am also fully aware that an unexpected large move will take out my emergency SL.

Thanks for posting this. I cant wait to try it out on Sunday! Appreciate the hard work.

NZDUSD long trade, +77.6 pips( 8 lots at +9.7 pips).

Hi Ninja!
Trying to analise your trades I'd like to ask: what's your brokers timezone?
Thank you!

It is GMT+2. Please keep in mind that over 80% of the trades that I have posted here, some of the indicators looked different at entry time compared to exit time, so you can't really analyse the indicators at the exit to see what they looked like at the entry time!

EURAUD short trade, +48.0 pips ( 8 lots at +6.0 pips). For example, here at entry time EUR was in the second position from the top on the left currency strength meter and at the trade conclusion, it is in the third position form the top.

EURNZD short trade, +67.2 pips ( 8 lots at +8.4 pips). At the time of entry the top right meter was all red.

Very much appreciated to read about all those systems, I'm going through the "Trending" PDFs to grasp the ideas and the difference with the rainbow in this thread. Gonna read the whole thread before asking stupid questions, currently trying with some indices (US30) in a demo account.

[EDIT] Tried to couple it Genesis for the M5 analysis, M1 is rainbow. I made a lighter rainbow with dashed lines instead of full lines. Template attached below if you want to try. I looked for "red" compressing against the yellow layers. The red stripe did not go deep into the inner layers due to a high bullish momentum. Quite promising on the performance side.

May I ask what are the exact rules for entry and exit?

Should we wait for all lines to begin to change direction? Isn't that too late?

AUDCAD long trade, +81.6 pips (8 lots at +10.2 pips).

I wish you all a very Merry Christmas.

Market is having some rest, meanwhile I'm working on my indicators by looking at the start of this thread where Laguerre and CCI were mentionned. Wanted to make the crossing around 0 (CCI) and at 0.85/0.15 levels more clearer (Laguerre). I attached the updated .ex4 just in case it's useful to someone.

Pipsninja,

Great to see that you have become extremely proficient trading the Rainbow. It appears, that all of your research and dedication is paying off. I could have easily uploaded the rainbow and the indicators that I show on my charts, ( which is what many traders want as to be hand feed) but by not doing so, your dedication and drive to learn this system became apparent and motivated you to undertake a journey to find them yourself, and make the chart your own, driven by your passion to succeed........

What I ideally will look at is the trend on higher t/f's and then drop down to M1 or M5 and look for a retrace and when PA at that lower t/f retraces and moves back into and joins the main trend then look for an entry ( but must be careful that this retrace is not, in fact, a change in trend) Prior to entry all considerations must be given to PA location relative to key levels as S & R, volume and up coming news events, trading session etc., and the chosen currency momentum is sufficient to propel you into nice profits.( this momentum is critical for quick pip scalps) I personally trade a couple of systems that play nice together as this is one. Trading is not a "one size fits all" business and one must think outside of the box..


Regards and Stay GREEN My Friend!

Thank you for the compliment, your trading has been inspirational.

I am in the process of replacing the TMS Matrix with the Sonic Volume indicator and the rainbow with the dragon . If you decide to start your own thread, I would be happy to contribute. Happy GREEN Pipping My Friend in 2016 and Beyond.

That's what I trade on the PVSRA thread and only check out the rainbow sometimes for a nice visual trend.