Learn About Rainbow Trading at IQ Option

Learn About Rainbow Trading at IQ Option

Rainbow Trading might sound like a peculiar name for a trading technique, but don’t let that put you off as there are many perks for those who adopt it. If you want to learn more about it, then IQ Option has the perfect guide for you.

Rainbow Trading basically combines 10 indicators in one, with the option to add more if you so wish. This means that when you are implementing it on a trading chart a selection of colours will be visible – much like a rainbow, hence the name.

While having an aesthetically pleasing graph is one benefit, there are numerous other benefits by which using 10 indicators may benefit you. Namely, that these moving averages combined tell their own unique story about a specific asset’s behaviour.

Therefore, the second perk of Rainbow Trading is a unique, all-encompassing perspective into the market which can see you stand to gain more profit when trading CFDs. Thanks to IQ Option, the benefits of this trading are clearly outlined to you in an easy to comprehend fashion which thus means that you can get started with this fantastic method asap.

How Rainbow Works

According to IQ Option, in a nutshell, “Rainbow MA is a combination of moving averages of different length that are all plotted on the same price chart”. The intersection in this chart can indicate price reversal. With this, knowledge you can more accurately estimate the trend’s strength.

The more colours in your Rainbow per se, the longer a complete reversal will take to be shown. Of course, good things come to those who wait. However, you should be wary of expanding those lines above the recommended 10 indicators all the same, as you don’t want to be sitting on those potential market trades too long.  IQ Option outlines three main way by which you can implement the strategy.

These are that you can either combine it with other technical analysis tools as a trend-following indicator, use it on its own, or you can use it to enter a position in the direction of the general trend and against the retracement. The latter of these though can be used only on strong trends as a means to look for a short-lived retracement. You will also need to tell a trend from a retracement.  All three of these techniques are explored by IQ Option in-depth and you should head over to their platform

Getting Started

The option is already available at IQ Option and the guide also includes a section where they help you get started using Rainbow Trading on their trading platform. A quick run-down of how this works is that first, you will need to click on the  “Indicators’ button in the bottom-left corner of the screen and then on the ‘Moving Averages’ tab.

This will allow you to choose the number of periods which will, in turn, affect the sensitivity of the indicator. It is worth bearing in mind that a lower number will decrease the number of false alarms when using the technique. You should all allocate your moving averages, and finding the right balance is key in this respect. On average, most traders use 6 to 8.

Finally, you can choose the price type and the moving average type that is visible. The default parameters for these are Close price and SMA which are also the most commonly used. However, you can choose to set them however you like.

If you want to learn more or to get involved then go to IQ Option now who have the full toolkit you need.

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