Rainbow Forex Scalping Strategy

Scalping deals a whole lot with the psychological aspect of trading, by eliminating a great amount of emotions that comes with trading.

The trader is not expected to monitor his positions that are live in the market for possibly hours.

The Rainbow Forex Scalping Strategy provides you with simple rules to buy and sell pairs and to take profits from scalping the currency markets.

Chart Setup

MetaTrader4 Indicators: RainbowMMA_05.ex4 (default setting), RainbowMMA_08.ex4 (default setting), SpearmanRankCorr.ex4 (default setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute

Recommended Trading Sessions: London, New York, Tokyo

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy in the market if the following indicator or chart pattern get displayed:

  1. If the dark blue line of the SpearmanRankCorr.ex4 custom indicator breaks above the 0.00 signal level as shown on Fig. 1.0, price is said to be pressured higher i.e. a signal to enter a buy order in the market.
  2. If the RainbowMMA_05 (lime & pink lines) crosses the RainbowMMA_08 (deep sky blue lines) bottom up with price trading somewhat higher, the market sentiment is said to be bullish, hence a trigger to buy the selected currency pair.

Stop Loss for Buy Entry: Place stop loss 3 pips below support or below the green rising rainbow line.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  1. If the dark blue line of the SpearmanRankCorr.ex4 custom indicator declines to fall below the 0.00 signal level during a bullish trend, price is believed to be making a U-turn, thus a trigger to exit or take profit at once.
  2. If the RainbowMMA_05 (lime & pink lines) intersects the RainbowMMA_08 (deep sky blue lines) top downward during a bullish trend, it is pointing to a possible price reversal, as such an exit or take profit is advised.

Sell Entry Rules

Enter a sell order if the following holds true:

  1. If the dark blue line of the SpearmanRankCorr.ex4 custom indicator breaks below the 0.00 signal level as depicted on Fig. 1.1, price is said to be pushed lower i.e. a signal to enter a sell order in the market.
  2. If the RainbowMMA_05 (lime & pink lines) crosses the RainbowMMA_08 (deep sky blue lines) top downward with price trading somewhat below, the market sentiment is said to be bearish, hence a trigger to sell the selected currency pair.

Stop Loss for Sell Entry: Place stop loss 3 pips above resistance or above the green falling rainbow line.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following indicator or chart pattern takes center stage:

  1. If the dark blue line of the SpearmanRankCorr.ex4 custom indicator rises to break above the 0.00 signal level during a bearish trend, price is said to be taking a U-turn, thus a trigger to exit or take profit at once.
  2. If the RainbowMMA_05 (lime & pink lines) intersects the RainbowMMA_08 (deep sky blue lines) bottom up during a short market, it is a pointer to a probable reversal in price, as such an exit or take profit is recommended.

Sell Trade Example

Fig. 1.1

Free Download

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About The Trading Indicators

The RainbowMMA_05 and the RainbowMMA_08 custom indicators are the fifth and eighth GMMA forex series of eleven technical indicators largely dependent on the Guppy multi moving average.

The SpearmanRankCorr.ex4 custom indicator for MT4 was initially implemented from the field of statistics.

Charles Spearman, in 1904 was able to design a statistical gauge for the strength of association between two variables, which obviously became the basis of the rank correlation coefficient, and was named after its creator (Spearman’s rank correlation coefficient).

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