MACD RAINBOW for the day trader - How to use it

Will post a revised system as I iron out some weaknesses.

Genghis-K,

I’m intrigued to your set up.

I included a picture so I might get some clarity.

When I dragged the MacD over each other I started with 2,3,2. When I finished with the last one it was covering most of the colors.

So I did it again and this time I started with the 11,12,11 and ended with 2,3,2. Which one of the graphs is correct?

Next question:

What time frame do you watch the MACD. 1hr, 30m, 1m etc?

When do you enter a trade?

Thanks,

Joe Smoe


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Hi Genghis, I am trying to set up your system but I cant find a way to overlap my histograms. I am using MetaTrader 4 on FXPro. Will your system work with MT4? If so how do I overlap the histograms?

It just keeps stacking them one on top of the other, and wont let me drag them.

Any help would be great, thanks.

Serge

If they are being stacked , are you able to see the histograms graduate ie colours fan out ? I am not sure of MT4 as I have never used it. I have attached a screen shot of what you should be looking at.


To be honest I have got used to this method so much I dont even look for S and R anymore. I look for any material move that may have continuous momentum with the 2 MACD charts. It is an exercise in patience but be assured you dont fall for the fakeouts and the stop hunters. Rather you stay out of a move which is better than ending up praying it goes your way. If you have a bundle of currencies then you dont have to be that patient so as to get bored. If you can set this up and observe what is happening you will easily pick up on what happens in a fakeout and be able to ride that train while others have just had their stop losses hit. Its a very visual system and all does is seek consensus in the price direction and whether the price action will continue.

Instead of double clicking the indicator to add it, simply drag it from the list into the window you’d like it in.

Can I ask someone to post the related indicator in here, Please

Thanks

Looks like you have refined the art of Multiple Macd to a fine science…!!!

Thanks again

dave

Thanks for the responce

When you say the “price chart” is there another name for this indicator, I can seem to find it?

I am still a little confused as to what to look for on the overlapping histogram and price charts. I see the first wave matches the increase in price but from there doesnt seem to be much of a pattern at all. Sorry to be a little slow on the uptake, am fairly new to forex and want to be sure I understand how to use this method properly. I too have been failing the pain of the fakeout momentum change using MACD the standard way. Also are you using this on the 4hr chart then moving down to 10 min somehow to confirm results?

Also since you are primarily using the 1 hr chart for this I am assuming these are longer trades you are entering ie. 7 - 8 hrs or more?

Any help would be great, Thanks
Serge

Ps. thanks bkr1969 that did the trick!

The price chart is the normal price action chart whether it is candlesticks or bars. plain and simple. On this you will draw yout S and R lines. I use 1 hour charts. If a candle / bar cuts a S and R line lets say long (upward) at 12.00pm wait until 13.00 pm and make sure the candle / bar settles above the SR and not just penetrated and retraced below, then look at the corresponding histogram and make make sure all the histograms are above the 0 horizontal line - that no bars are under the horizontal line - and that the colours are fanned out. I always look for 6 colours to be visible. To make sure that the 1 hour chart is not about to go into a whipsaw I use the second MACD line chart as previously described and make sure all the colours have crossed the 11 12 11 MACD signal. If everything is in order you now have to assess whether there is sufficient mass / momentum - call it what you like - in the move. Remember you are a reactive trader. You can anticipate the move and ride the wave, but then why waste your time trading ? Just anticipate the lottery numbers ( just a bit of humour). Drill down to the 10 minute chart and then look for 2 histograms as you would in the 1 hour ie upward / fanned / 6 colours and take the price. I have seen all the right signals on the 1 hour chart and waited to get in on the 10 minute and I thankfully have not because the breakout move has ran out of steam. If I used the old breakout system technique i would be long and the market would be going short. And belive me in the early days I used to get whacked out with these false breakouts.

Sergei, I keep on failing to answer all your questions. I am in the trade for about 1- 3 hours but it does vary. It can be 20 minutes. The shorter the better ! This is entirely dependant on whats happening. I go in and expect to take about 40 -50 pips on GBP /USD, and 25 ish on EUR /USD and other currencies it varies. As you know if you have a basket of currencies you can have this set up and trade frequently. I dont like holding onto a trade. Other than false breakouts and stop hunting, fear, greed and impatience will also knock you out. I stick to about 80 pips a day. I use this method when markets are jumpy like now or when there is news as that always ( sort of) moves the market. I have a set up when I can see a fakeout happening and capitalise on that so when there is a move and I see the breakout is not going through i look for specific signals to tell me markets were tapping the stop losses and price is actually heading in the opposite direction. The hard part is the waiting … always good to have a good book at hand.

Thanks again for you help you’ve been great. Just to be clear you look for a possible breakout, wait an extra hour to make sure the signal continues in the same direction. Check your histogram on 1hr to make sure all colours fanned out in same direction. Then go down to the 10min (5 or 15 in my case with MT4) and make sure the last two histogram bars both have all colours in same direction.

Is this correct?

Thanks again Genghis I really appreciate the help.

cheers!

Hey buddy. Thanks for sharing your system with us.

I’m trying to setup my MACD chart with ones you’re using with your system:

What time frame do you usually use?


Sergei1 that is correct but also look at the thread detail about the MACD line and signal in the second chart ( look at my attachment). this will keep you out of any whipsaws. IAs mentioned I use 1 hour charts and trade the news / breakout. Also backtest this yourself. Its the only way to assure yourself.

And as an example today 30/01/2009 GBP/USD 1 hour signal at 14.00 hrs (GMT) 10 minute entry occurred at 16.10 (GMT) bought at 14397 sold at 14489. See told you it works !

Cool! All my numbers line up to yours except I dont have 10 min charts on MT4. If I examine my 5 min chart at 16:10 GMT I have part of the histogram bars going in the opposite direction. However on my 15 min chart at 16:15 I have the fan out effect without any bars going down.

So just to get things clear this is what you did:

  1. saw a possible breakout at 14:00 GMT because the candle on the 1 hr chart had penetrated the resistance line, and you have 6+ colours on the histogram fanning upward with none going down.

  2. At 15:00 GMT the next candle holds a position above the resistance level, and your histogram continues to fan out upward without any bars conflicting down. This gives you a confirmed breakout.

  3. Go to the 10 min chart and wait for upward movement again on the price chart, with bars fanning upward and no bars going downward on the histogram. This occured just 10 min later at 16:10 GMT.

Does this just about sum it up (not including the MACD line graph).

Thanks agian, Serge.

thats it. I was in the process of editing the original info as I was not very coherent. i am going to write on a bit of paper and re post in a more detailed and accurate instructional way. best Regards

Once you have mastered that I will tell you how to trade a fakeout so your time is not wasted. That is to say if the market moves one way or another - as long as it moves - you will be in a trade.

That would be awesome!

There was one other thing I was wondering about when analyzing your trade today. Ok I understand that you need to wait until 15:00 GMT to confirm the signal is going to hold above the resistance line on the [B]1 hr graph[/B]. But when Im looking at the histogram bars on my [B]15 min graph [/B]between 15:00 and 16:10 GMT it seems like these are all good entry points.

[B]Still on 15min Graph:[/B]
The price keep rising, there is a flared bar upward with no contradicting bars in the other direction on my histogram for 15:00, 15:15, 15:45, 16:00. Note: at 15:30 only two colours showing but no bars in the contradicting direction. (? not sure what this means)

Then from 16:00 - 17:00 the price keeps rising, however there is only 1 colour showing upward on the histogram (10,11,10) and no bars pointing downward (similar to 15:30), (not sure what this means).

Just trying to piece together how and why you decided to enter at 16:10. If I was looking at my histogram, and if I am understanding how all this works I probably would have jumped in at 15:15. I am assuming I am doing something wrong here as you have perfected this system.

Once again thanks for all your help I really appreciate this.

Serge