Rainbow WMA: Adjustable Recursive Depth for a Smoothed Trend Average

Summary

Rainbow WMA is described as a generalized form of Mel Widner’s Rainbow Average, with a connection to the Guppy Multiple Moving Average. It produces a single average value and allows the user to adjust the recursive calculation depth. The source contrasts this flexibility with the original version’s fixed depth, presenting adjustable depth as a way to explore more smoothing settings.

Increasing depth makes the average smoother, while the document claims that major trend changes do not become excessively delayed. It gives no formula, chart examples, parameter comparison, or performance evidence to support that claim, so the lag and smoothing trade-off cannot be assessed from the text alone. The indicator is therefore presented as an experimental trend-analysis tool rather than a defined trading strategy. The author advises testing parameter choices before using it in trading; no entry, exit, or risk-management rules are provided.

Key ideas

• Rainbow WMA adapts the recursive Rainbow Average into a single-value indicator.
• Its calculation depth can be varied rather than kept at one fixed setting.
• Greater depth increases smoothing, with the document asserting limited delay around major trend changes.
• The source gives no empirical comparison and recommends experimenting with settings before trading.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.