[walterw]

I am glad you like it friends... I think it has a great potential because basicly it takes simple clasic concepts and takes them to the next level...

Let me continue here a little more...

So what will be our "trend definition" for this trend trades ? simple, we will take this black line (VMA) and the last Ema of the vma the Magenta line and say:

UP trend = Black > Magenta

DOWN trend = Black < Magenta






Woooow great reasoning ¡¡¡ jejejej.... but notice that thanks to the horizontal efect, the black line will have a smooth performance in relation to the magenta line and we will rarely see whipsaws going on between both...

The normal scenario on a chop situation being both average near looks like this :




Notice on the above chart how we have two chop areas going on (cyan rectangles), but look how they are in two clear trend definitions black above/below magenta... giving us some clear understanding of trend... even on this unclear (for other traders) scenario... we had a simple bias established...

So this is our trend definition, cant get more simple... and it has embeded the great advantages of noise reduction thru the "horizontal efect" of this great tool...

Tomorrow I will keep posting on momentum giving quality to our trend... (the rainbow in action ) cheers Walter.

[walterw]

And here a small description on video about this trend definition... cheers Walter. (hope you understand my english)

[brownsfan019]

Interesting thread here Walter!

I watched the video and the definition of the trend is clear.

I assume the next steps are to define when/how/where to enter and when/how/where to exit? How has this looked in real-time for you? I haven't done much in forex, but it is of interest to me occasionally.

[PYenner]

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[walterw]

Originally Posted by brownsfan019 »

Interesting thread here Walter!

I watched the video and the definition of the trend is clear.

I assume the next steps are to define when/how/where to enter and when/how/where to exit? How has this looked in real-time for you? I haven't done much in forex, but it is of interest to me occasionally.

Yeap, the thread will gradually explain all the classic trend trade structure... cheers Walter.

[walterw]

Ok... now that we have a basic trend definition with all the advantages that the VMA can give us, we are ready to introduce the Momentum definition into our ecuation... the momentum definition will tell us the "quality" of our trend... is it a strong or weak trend ?... so we dont only know our trend definition but we will also know the quality of our trend thru the momentum definition...

Here is where the "Rainbow" will show its edge to the trader...

Why the rainbow and not the first and last averages of the rainbow ? (black/ magenta)... well you will notice that the rainbow will graphically amplify the perception of momentum readings on the chart... so it will make more easy to perceive in what momentum condition we are...

At this point we will have Three basic Momentum readings :

_Contraction/Expansion

_Ladder Effect

_Complete Rainbow above/below Magenta line

lets start with _Contraction/Expansion :

To start making simple this momentum definition let me give you an ilustration of a real large highway (lots of lanes) ...

If there is small trafic you will notice there are some cars taking the 1rst and 2nd right lane (thin) as the rush hour comes in, you will notice 1rst to 6th lane get all filled with cars (thick).. so it looks thin with very few cars and it looks thick with lots of cars in it...

Same with the rainbow... it looks contracted when there is small momentum and it spreads out as momentum gets stronger...





on the example above you can see that we are in a basic downtrend as black < magenta... now during this downtrend we can notice there are diferent momentum definitions very clearly expressed thru the rainbow as it contracts and expands telling us the quality of our trend...

Knowing the quality of our trend its very important as to the context we will choose to make our trend trades... for example if we have a downtrend that is weak, taking shorts may become agressive... thought we have a downtrend by basic definition, the momentum definition its not strong, making this shorts agressive...

Now, if our momentum is healthy, the more confidence we will have on our trade...

_Ladder Effect:

One interesting way momentum builds up with our Vma rainbow its the "ladder effect" normally when the black line crosses the magenta it makes a horizontal pause and after that if there really gona be momentum, then we have the first ladder step that will form on the direction of the desired trend...

On the below graphs I try to explain how a trend may develop or not with the "ladder effect"






So this ladder can keep us out of this type of situations where we got a trend definition but without momentum buildup, and also give us confidence in the case momentum starts building with a positive ladder effect..



on the next post I talk about the third momentum definition _Complete Rainbow above/below Magenta line ... cheers Walter.

[walterw]

and the third momentum definition :

_Complete Rainbow above/below Magenta line

here is another definition wich is very interesting to gauge the health of our trend... is the entire rainbow above/below the magenta line ? remember that the magenta line is the most large average in the rainbow, and having all the rainbow in one side of this magenta line speeks good of our trend health, even in some cases when it is contracted...

let me show you some examples :







So with this third momentum definition you got quite an arsenal to establish a "complete trend definition" for our trend trades...

a trend definition that includes a cool basic trend definition thanks to the VMA performance in relation to the magenta line and a momentum definition of the trend with this three diferent readings of the VMA Rainbow...

So far I could say we have a simplified and optimized "trend definition"...

Now I move into some videos about this three momentum definitions... cheers Walter.

[Z_trade]

Walter, as always, very informative new strategy, thanks for sharing!

Interesting concept you demonstrating, on your last chart the longer term MAs are compressing, creating high density area that is clearly show market in consolidation/squeeze.