Contents
Rainbow pattern overview
A rainbow pattern on the Binomo platform is a graphical pattern that is based on three EMAs (exponential moving averages) with distinct periods. To make the picture transparent the indicator lines should all have different colors.
Go to chart preferences feature and choose “Moving Average”. Set the period to 6, choose the type of the moving average which is “Exponential” in this case and select the blue color. The last thing to do is to click the “Apply” button.
Repeat the procedure for two more exponential moving averages. The second time the period should be set for 14 and the color to yellow, the third time the period of 26 and the color red.
Signals received from the rainbow pattern on the Binomo platform
Signals to open a sell position
There are three EMAs on the rainbow pattern. You must observe these indicators’ lines and wait for a favorable situation to occur. What could be such a favorable situation?
During an uptrend, the blue EMA6 should move over the rest of the indicators. Underneath should be the yellow EMA14 and the red EMA26 at the bottom.
Now you are waiting for the intersection of the lines. The blue EMA6 should cross the yellow EMA14 from above and continue downwards. This is a signal to enter a sell position.
Signals to open a buy position
The opposite situation happens when the blue EMA6 is at the bottom, the yellow EMA14 above it and the red EMA26 on top; here a price increase is expected.
The signal to enter the trade occurs when the blue EMA6 crosses the yellow EMA14 from below and continues over it. This is the time you should open a buy position.
Summary
The rainbow pattern consists of three exponential moving averages with different periods and colors. It is not very difficult to apply. In short, you just need to wait for a crossover of the EMA6 with the EMA14. Like always in the trading business, patience is very important. You have to wait until a signal appears and enter the market at the right moment. Rushing in is not a good idea. Watch carefully the lines of the indicators and wait patiently for a favorable situation to happen.
You may also be interested in reading the guide about the strategy that uses the Simple Moving Average.
Please leave the comments on the rainbow pattern below.
Best of luck!