Ok... so lets start with the first definition here :
Trend Definition
We need to determine trend if we want to make trend trades, there are multiple ways of determining trend, but remember we are after simplicity and optimization...
Let me tell you a little bit of history now, how I came to the trend definition I am about to present... During this entire process I have been interacting a lot with Don, in some point Don has showed me some threads dealing with the topic "rainbow trading" if you would like to see some of this here I attach the links to this threads that deal with rainbows, one of the first developers on this aproach was GuppyMMA
http://www.guppytraders.com/gup329.shtml you can get to see there some aspect on rainbows... after that a member called Linuxtroll develped something at here
http://www.forexfactory.com/showthre...ng#post1494655 about rainbows too... now in this case he doesnt give any hint on timing letting the traders figure that out by themselfs, wich it may work for some it may not for others...
Now this rainbows are simply averages, no sofistication here, you could simply use the smallest and the largest one and get the final same output... but the interesting thing here is that plotting all this lines actually give some more information in terms of momentum of trend wich can tell us about the quality of the trend...
Now as I like to take things a little further I came up with something I believe outstanding... some guy called Bemac, who is a moderator from this forum
http://www.visualtradingcharts.com/forum/index.php came up with a
NEW kind of Rainbow wich I notice nobody really understanded much the value of this new indicator as it almost did not get much response the indicator is presented here
http://www.visualtradingcharts.com/f...ead.php?t=2767 and works on the VT platform wich is a very nice performing platform as it is also free with streaming realtime forex data...
Now this new Rainbow indicator is based from a Variable Moving Average, as you should know VMA`s do adapt their input depending on the amount of volatilty... here is some definition
http://www.fmlabs.com/reference/defa...VariableMA.htm in that definition you may notice that the Chande Momentum Oscillator (CMO) is normally used for volatilty calculation on this average, well Bemac aparently uses some form of ADX for his VMA and then creates the rainbow with emas from this VMA...
To make it simple, this rainbow looks formidable ¡¡
It has some properties that I will try to explain gradually to you, so you can get to value this powerfull indicator...
First should we talk about the normal problems trend indicators suffer.... next post... cheers Walter.