The «Colorida» 5-Minute Linear Strategy
One of the main advantages of the TradingView platform (site: https://www.tradingview.com/) is the large number of tools for technical analysis. It includes not only integrated indicators, such as MACD, Moving Average, Bollinger Bands, or Alligator, but also numerous user solutions. The catalog offers several thousand various tools for technical analysis.
In this article, we will look at a strategy that is based on a nonstandard modification of the MA – a peculiar kind of Alligator, which resembles it externally but operates on a different principle. It is the Média Móvel Colorida. The indicator has not yet gained great popularity nor is it included in the most popular TradingView developments from users. However, that doesn’t mean it is of low quality. On the contrary, according to the results of our testing, this tool showed high efficiency of binary options trading market forecasting in conditions of high volatility.
Setting up the chart and web terminal
TradingView live chart are a convenient and highly functional service for technical analysis. But it is impossible to trade on them. Trades should be concluded in a separate browser tab, where you have a web terminal from any company open. If you are already trading on a platform, you can open that website. For beginners, we recommend Binomo (site). This is one of the modern leaders of international online trading (binary trading for beginners).
Step-by-step instructions on how to prepare trading platforms for the strategy:
- open two browser tabs – in one the live chart from TradingView, in the other the Binomo web terminal or another company you trade with (ranking of binary options brokers);
- in both tabs, we configure the charts in the same way – asset, timeframe of 1 minute, candlestick mode;
- add two indicators to the TradingView window – «Stochastic Relative Strength Index» and «Média Móvel Colorida – Color MA»;
- adjust the Color MA period to 20 and adapt the appearance in a more convenient way, for example, increase the color saturation and thickness of the lines; leave the oscillator parameters at the standard values;
- in the tab with the trading platform, specify the amount of investment in the trade in advance. It is recommended to use less than 1%, or if the account size allows, up to a maximum of 5% of the balance.
Média Móvel Colorida is a highly functional indicator that allows you to effectively predict the market in terms of trend reversals. For this, we must pay tribute to its creator, a portal user with the nickname [AlanGimenes]. However, there are special characters in the name, so finding it in the search won’t be quite so easy. To do this, insert the keyword «Colorida» and choose the right one from the list (see the screenshot above). The second indicator can be found using its abbreviated name – «Stoch RSI».
Trading signals on the strategy
The Color MA indicator has 3 fill colors: red – downward movement, green – upward, yellow – neutral. Interpretation is standard for technical analysis tools. Entering the market is carried out after the price overcomes two curves in a row. It’s the same as trading, for example, using the Bill Williams Alligator or another similar instrument with three Moving Averages.
The signal for a fall is the reversal of a long uptrend. Color MA reacts to this by coloring 2 curves yellow. Enter the market after the closing of the current candle below the extreme Moving Average of the indicator. Signal confirmation is the Stoch RSI oscillator falling from the overbought to oversold phase.
The signal for an increase is the rising of candles on the chart above the 3 curves of the Color MA. Confirmation from the Stoch RSI oscillator is the confident transition of the line from oversold (below 20%) to overbought (above 80%).
A key success factor in trading with this system is the overall market condition. Too frequent generation of signals (usually 1 time every 20 minutes) in most cases means there is a horizontal trend, when it is impossible to trade using technical strategies. Therefore, beginners should remember a simple rule. Trades can be opened when the signals of the indicators are formed during the reversal of strongly pronounced and long upward or downward trends. Examples of such situations are clearly illustrated in the TradingView screenshots presented above.
It is possible to increase the number of signals if you simultaneously trade several assets. Binomo and many other popular trading platforms support multi-mode with independent tabs. For example, you can open some of the most profitable currency pairs and once every 3-5 minutes, check on the TradingView chart to see if the market is preparing for a reversal.