Rainbow Charts Signals for Bitcoin

Developed by Mel Widner

This indicator functions as a Bitcoin trend follower, bearing similarities to moving averages - it is rendered using a 2-period simple moving average. This base Moving Average (MA) is subsequently smoothed ten times over to generate a total of ten distinct moving averages. The initial MA acts as the foundation, the second MA is computed using the first, the third using the second, and so on. This progressive calculation results in a rainbow-like formation of the Bitcoin crypto trend, with each successive moving average assigned a different color for visual clarity.

Utilizing Rainbow Charts as a Technical Indicator for Bitcoin Analysis

BTCUSD CryptoCurrency Analysis and Generating Signals

Bullish Bitcoin Trading Trend/ Upward BTCUSD Trend

When the bitcoin trend in the btcusd market is Upward/bullish trend, then the rainbow will be moving upward, the least smoothed line will be at the top of the trading indicator, this is the red-line and the major smoothed line - Violet will be at the bottom of the trading indicator, this is the violet line.

Bearish Market/Downwards Bitcoin Trend

When the prevailing bitcoin trend is downward (bearish), the rainbow charts will descend, positioning the major smoothed line (Violet) at the lowest extent and the least smoothed line (Red) at the highest extent.

Bullish and Bearish Bitcoin Trend Indicators - BTCUSD Rainbow Charts

Bitcoin Trend Continuation Signal

As the Bitcoin trend maintains its trajectory, whether upwards or downwards, the rainbow charts track the Bitcoin price movements closely. The further the Bitcoin price deviates from the rainbow chart structure, the stronger the indication that the Bitcoin trend is likely set to persist: this is interpreted as a signal of trend continuation. Concurrently, the lines comprising the indicator will expand their separation, which itself serves as an additional signal confirming trend continuation.

Bitcoin Trend Reversal Signal

When Bitcoin's price heads for the rainbow chart lines, it hints at a trend shift. The lines squeeze together, which points to that change too. The signal locks in once price breaks past every line and the chart direction flips.

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