Indicator - MACD Rainbow
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Definition MACD Rainbow
The MACD rainbow allows you to add colors to the MACD curve depending on the characteristics of other indicators. This is a great example of how you can add a new dimension to your indicators by varying their color as a function of other indicators.
Several color modes are available. Choose the color mode in the "Settings" window to view the different possibilities.
- The first modulates the color of the MACD histogram depending on time.
- The second modulates the color by the results of 3 indicators: Bollinger Bands, RSI and Stochastic.
- In the third mode modulates colors depending on whether the security is in an "overbought" or "oversold" zone.
Interpretation MACD Rainbow
For color mode 1: The benefit for technical analysis is limited. This serves as a simple example of how vary the colors of one indicator with the results of another one.
For color mode 2: The color intensifies with an intensifying signal. A more and more intense violet shows that an increasing trend is weakening and that a downward reversal is probable. The red will appear when a downtrend trend is weakening and an upward reversal is probable.
For color mode 3: This is a way to view the MACD colored by overbought and oversold signals. Bullish and bearish signals are given when the MACD histogram crosses over 0 and can be seen as intensified depending on the color reflecting an "overbought" or "oversold" state of the security.
