Rainbow EMA + WMA — Olymp Trade Strategy
A “rainbow” is nothing more than several moving averages of increasing length plotted on the same chart, each in a different colour so the group looks like a band. On Olymp Trade this setup is popular for reading short-term direction on fast fixed-time modes. Be clear from the start about what it does and does not do: a rainbow is a lagging, trend-following read. It confirms a move already under way and whipsaws badly when the market is going nowhere. Used that way it is a tidy way to visualise trend and strength; used as a signal to fire on every wiggle, it will frustrate you.
What the Rainbow Actually Plots
You stack a series of exponential moving averages (EMAs) from short to long — a fast one that hugs price and progressively slower ones behind it — and add a weighted moving average (WMA), which reacts faster than an EMA of the same length because it weights recent candles more heavily. When price trends, the fast lines pull away from the slow ones and the whole band fans out in the direction of the move. When price stalls, the lines bunch, cross and tangle — the market telling you there is no trend to follow, which is exactly when the setup is least reliable.
How to Read It
Three states are worth learning to recognise:
- Fanned and stacked in order (fast above slow for an uptrend, fast below slow for a downtrend, with clear spacing): the trend has momentum and direction is relatively clear.
- Flattening and converging: momentum is fading. Existing moves are running out of steam and continuation becomes less likely.
- Tangled and crossing repeatedly: the market is ranging. Signals here are noise, and cause most losing trades.
Because the lines only fan out after a move has begun, you are always confirming, never predicting — that lag is the price you pay for filtering out noise.
Setup and Settings
This method is usually run on a very short Olymp Trade timeframe — commonly 5-second Heikin Ashi candles for smoother colour changes, with fixed-time positions around the 30-second range. Exact periods matter less than the spacing behaviour, so treat the following as a starting template, not a magic recipe:
- Several EMAs of increasing length (for instance a fast, a medium and a slow) so the band has depth.
- One WMA to act as the quicker, front-running line of the group.
- Keep the chart otherwise clean so the fan and the tangle are easy to see at a glance.
Adjust the lengths to the pair and timeframe you trade, then leave them alone. Constantly re-tuning periods to fit the last few candles only fools you.
Entry Rules
Keep the rules mechanical so you can apply them calmly inside a short window:
- Up: the band is fanned out and stacked with the fast lines on top, spacing is widening, and the WMA is leading the group higher. Wait for the candle to align with that order before entering.
- Down: the band is fanned out and stacked with the fast lines underneath, spacing is widening, and the WMA is leading lower.
- Stand aside: the lines are crossing or clustered together. No fan, no trade.
When It Fails
The rainbow fails in exactly the conditions where it looks tempting: quiet, sideways markets where the lines keep brushing against each other. Every small cross looks like a signal, you take the trade, price reverses, and the lag that protected you in a trend now works against you. It also lags at turning points — by the time the band re-stacks after a reversal, a chunk of the move is gone. No moving average setup removes losing trades, so trade only the clean, fanned states and skip the rest.
If you like moving-average reads, compare this with the two weighted moving average approach, the slower Olymp Trade 1-minute setup, and the very short Quickler mode.
A Note on the Old “Triple Trade” Advice
Earlier versions of this strategy suggested tripling your stake after a loss to “recover quickly.” Do not do this. That is a martingale: on fixed-time trades it does not recover losses, it stacks risk until a normal run of losing trades wipes out the account. Use a small, fixed stake per position, cap your trades per session, and stop at a preset daily loss limit.
FAQ
Is the rainbow strategy good for beginners?
The visual is beginner-friendly — a fanned band is easy to read — but the discipline to sit out ranging markets is not. Practise on a demo account until skipping the tangled setups feels natural before you risk real funds.
What are the exact EMA and WMA periods?
There is no single correct set. The behaviour that matters is the fan-and-tangle, not the numbers, so pick a fast-to-slow spread of EMAs plus one WMA and keep it consistent. Every indicator and preset used across the site is available on the single $39 lifetime plan.
Can I use it on other platforms?
Yes. A rainbow of moving averages plots the same way on any charting platform, so the same read applies whether you trade Olymp Trade, IQ Option, Quotex or Pocket Option.
This content is for educational purposes only. Trading involves risk. Past results do not guarantee future outcomes. Always practice responsible money management and limit your daily trades to avoid large losses.
