V.15:7 (289-297): Rainbow Charts by Mel Widner, Ph.D.

Here's a way that traders can use color for a visual cue about changes in trends

Repeated smoothing of data gives a spectrum of trends that, when plotted in color, have the appearance of a rainbow. Observe them all, pick your time frame, and act accordingly. The rainbow oscillator, a trendfollowing oscillator, is derived from a consensus of the trends.

Is there a pot of gold at the end of the rainbow? A fanciful and rhetorical question, but one that may in the final analysis have some truth. One approach to finding gold is momentum tracking and trend-following. Trend-following is a common, if not the most common, timing method used by traders and investors. In a perfect world, with smooth, continuous data, it would be easy to determine the direction of the price movement, open a position, hold it until the conditions change and then close the position. The underlying premise is that prices have momentum and inertia and will continue in the same direction until something occurs fundamentally to change that.