[blackcat] L1 Mel Widner Rainbow OscillatorNOTE: Because the originally released script failed to comply with the House Rule in the description, it was banned. After revising and reviewing the description, it is republished again. Please forgive the inconvenience caused.
Level: 1
Background
Mel Widner developed the Rainbow Oscillator and published it in 1997 in the Technical Analysis of Stocks and Commodities magazine.
Function
Mel Widner Rainbow Oscillator helps to predict the changes in the market trend and to follow trends. The oscillator is derived from a consensus of trends that, when plotted in color, has the appearance of a rainbow. It offers only two possible states, the upward and the downward. The Rainbow Oscillator is based on the Rainbow charts trend and is just like the Rainbow Moving Average charts. It works on the basis of a two-period moving average and its graph also helps to identify the highest high value and the lowest low value among moving averages. The Rainbow Oscillator is a simple indicator used to forecast trend reversal. It is a simple yet very important technical analysis tool. The oscillator works on the same rules as does the Rainbow indicator. It uses two simple moving averages, HHV and LLV. The Rainbow Oscillator creates an oscillator with bandwidth lines. Although it is a relatively new indicator but has become very popular for effectively forecasting the changes in the trend direction. The Rainbow Oscillator appears as a director of the trend as it follows the ups and downs of the market. The growing width of the Rainbow indicates that the current trend is likely to continue. The values of the Rainbow Oscillator beyond 80 suggest an unstable market and prone to a sudden reversal of the current market trend. On the other hand, when the prices move to the Rainbow and the Rainbow Oscillator begins to become flat, it indicates that the market is stable and the bandwidth decreases. The Rainbow Oscillator values falling below 20 again indicate an unstable market and also prone to a sudden reversal of the current trend in the market.
In simple words, we can derive the following rules.
The Rainbow Oscillator’s wider width suggests a continuation of the current trend.
The Rainbow Oscillator between -50 and +50 indicates a stable trend.
When traveling beyond 80, the Rainbow Oscillator suggests an unstable market and a possible reversal of the current trend.
The Rainbow Oscillator traveling below 20 also indicates instability and a potential reversal of the current market trend.
Key Signal
PosNeg --> Rainbow Oscillator Output.
Labels and alerts are added.
Remarks
This is a Level 1 free and open source indicator.
Feedbacks are appreciated.
Rainbow Oscillator
Rainbow Oscillator Backtest Ever since the people concluded that stock market price movements are not
random or chaotic, but follow specific trends that can be forecasted, they
tried to develop different tools or procedures that could help them identify
those trends. And one of those financial indicators is the Rainbow Oscillator
Indicator. The Rainbow Oscillator Indicator is relatively new, originally
introduced in 1997, and it is used to forecast the changes of trend direction.
As market prices go up and down, the oscillator appears as a direction of the
trend, but also as the safety of the market and the depth of that trend. As
the rainbow grows in width, the current trend gives signs of continuity, and
if the value of the oscillator goes beyond 80, the market becomes more and more
unstable, being prone to a sudden reversal. When prices move towards the rainbow
and the oscillator becomes more and more flat, the market tends to remain more
stable and the bandwidth decreases. Still, if the oscillator value goes below 20,
the market is again, prone to sudden reversals. The safest bandwidth value where
the market is stable is between 20 and 80, in the Rainbow Oscillator indicator value.
The depth a certain price has on a chart and into the rainbow can be used to judge
the strength of the move.
You can change long to short in the Input Settings
WARNING:
- For purpose educate only
- This script to change bars colors.
Rainbow Oscillator Strategy Ever since the people concluded that stock market price movements are not
random or chaotic, but follow specific trends that can be forecasted, they
tried to develop different tools or procedures that could help them identify
those trends. And one of those financial indicators is the Rainbow Oscillator
Indicator. The Rainbow Oscillator Indicator is relatively new, originally
introduced in 1997, and it is used to forecast the changes of trend direction.
As market prices go up and down, the oscillator appears as a direction of the
trend, but also as the safety of the market and the depth of that trend. As
the rainbow grows in width, the current trend gives signs of continuity, and
if the value of the oscillator goes beyond 80, the market becomes more and more
unstable, being prone to a sudden reversal. When prices move towards the rainbow
and the oscillator becomes more and more flat, the market tends to remain more
stable and the bandwidth decreases. Still, if the oscillator value goes below 20,
the market is again, prone to sudden reversals. The safest bandwidth value where
the market is stable is between 20 and 80, in the Rainbow Oscillator indicator value.
The depth a certain price has on a chart and into the rainbow can be used to judge
the strength of the move.
WARNING:
- This script to change bars colors.
