This tool is a custom technical analysis indicator designed to help traders visualize momentum and trend direction by combining three different moving average calculations into a single, color-coded visual display.
Core Methodology
The logic functions by layering three distinct mathematical layers to smooth out market noise and identify the "strength" of current price movements:
- The Baseline (MACD Logic): First, the script calculates two different Exponential Moving Averages (EMAs)—one fast and one slow. By subtracting the slow average from the fast average, it identifies the raw momentum of the market.
- The Signal Line: It then takes that momentum result and applies a Simple Moving Average (SMA) to it. This creates a "signal line" which serves as a smoothed baseline, helping to filter out erratic price spikes that might otherwise lead to false signals.
- The Final Calculation: The indicator determines its final position by comparing the raw momentum against this smoothed signal line.
Visual Representation and Logic
Instead of showing just a single line, the script categorizes the difference between the momentum and the signal line into four distinct visual categories based on their magnitude:
- Strong Positive Momentum: When the momentum is significantly higher than the signal line, it is displayed in one color (representing strong upward pressure).
- Weak/Neutral Positive Momentum: If the momentum is slightly above the signal line but stays within a very small predefined threshold, it changes color to indicate a weakening move.
- Strong Negative Momentum: When the momentum falls significantly below the signal line, it is displayed in another color (representing strong downward pressure).
- Weak/Neutral Negative Momentum: If the momentum is slightly below the signal line but remains within that same small threshold, it shifts to a final color to indicate a weakening bearish move.
Summary for the User
Essentially, this script acts as a "momentum filter." By using different colors to represent varying strengths of price movement, it allows you to see at a glance not just which direction the market is trying to go, but how much "energy" or "strength" is behind that specific move. It helps distinguish between a powerful trend and a momentum move that is beginning to lose steam.
Indicators Used
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//+------------------------------------------------------------------+
//| OsMA.mq4 |
//| Copyright © 2004, MetaQuotes Software Corp. |
//| http://www.metaquotes.net/ |
//+------------------------------------------------------------------+
#property copyright "colour update by thor@gmx.co.uk, Moneytec chat: thorr"
//---- indicator settings
#property indicator_separate_window
#property indicator_buffers 4
#property indicator_color1 Maroon
#property indicator_color2 DarkGreen
#property indicator_color3 Lime
#property indicator_color4 OrangeRed
//---- indicator parameters
extern int FastEMA=8;
extern int SlowEMA=12;
extern int SignalSMA=9;
extern double thresh = 0.0001;
//---- indicator buffers
double ind_buffer0[];
double ind_buffer1[];
double ind_buffer2[];
double ind_buffer3[];
double ind_brighthi[];
double ind_brightlo[];
double res;
//+------------------------------------------------------------------+
//| Custom indicator initialization function |
//+------------------------------------------------------------------+
int init()
{
//---- 2 additional buffers are used for counting.
IndicatorBuffers(6);
//---- drawing settings
SetIndexStyle(0,DRAW_HISTOGRAM,STYLE_SOLID,2);
SetIndexStyle(1,DRAW_HISTOGRAM,STYLE_SOLID,2);
SetIndexStyle(2,DRAW_HISTOGRAM,STYLE_SOLID,2);
SetIndexStyle(3,DRAW_HISTOGRAM,STYLE_SOLID,2);
SetIndexDrawBegin(0,SignalSMA);
SetIndexDrawBegin(1,SignalSMA);
SetIndexDrawBegin(2,SignalSMA);
SetIndexDrawBegin(3,SignalSMA);
IndicatorDigits(MarketInfo(Symbol(),MODE_DIGITS)+2);
//---- 4 indicator buffers mapping
if(!SetIndexBuffer(0,ind_buffer0) &&
!SetIndexBuffer(1,ind_buffer1) &&
!SetIndexBuffer(2,ind_brighthi) &&
!SetIndexBuffer(3,ind_brightlo) &&
!SetIndexBuffer(4,ind_buffer2) &&
!SetIndexBuffer(5,ind_buffer3))
Print("cannot set indicator buffers!");
//---- name for DataWindow and indicator subwindow label
IndicatorShortName("RainbowOsMA("+FastEMA+","+SlowEMA+","+SignalSMA+")");
//---- initialization done
return(0);
}
//+------------------------------------------------------------------+
//| Moving Average of Oscillator |
//+------------------------------------------------------------------+
int start()
{
int limit;
int counted_bars=IndicatorCounted();
//---- check for possible errors
if(counted_bars<0) return(-1);
//---- last counted bar will be recounted
if(counted_bars>0) counted_bars--;
limit=Bars-counted_bars;
//---- macd counted in the 1-st additional buffer
for(int i=0; i<limit; i++)
ind_buffer3[i]=iMA(NULL,0,FastEMA,0,MODE_EMA,PRICE_CLOSE,i)-iMA(NULL,0,SlowEMA,0,MODE_EMA,PRICE_CLOSE,i);
//---- signal line counted in the 2-nd additional buffer
for(i=0; i<limit; i++)
ind_buffer2[i]=iMAOnArray(ind_buffer3,Bars,SignalSMA,0,MODE_SMA,i);
//---- main loop
for(i=limit-1; i>=0; i--)
{
res = ind_buffer3[i] - ind_buffer2[i];
// Sort it out now...
if (res < thresh && res > 0) {
ind_buffer1[i] = res;
ind_brighthi[i] = 0;
continue;
} else if (res > 0) {
ind_brighthi[i] = res;
ind_buffer1[i] = 0;
} else if (res > -thresh && res < 0) {
ind_brightlo[i] = 0;
ind_buffer0[i] = res;
continue;
} else if (res < 0)
ind_brightlo[i] = res;
ind_buffer0[i] = 0;
}
return(0);
}
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