The Red and Green Light Software for forex trading from Wizetrade, Globaltec and MBT will be discussed and fully described on this slideshow. This software is used for multiple time frame analysis of the forex.
About the Red and Green Light Software
The Red and Green Light Software for forex trading from Wizetrade,
Globaltec, and MBT will be discussed and fully described on this article. We
will include articles and various chart examples with all available videos.
Please forward any additional information to Mark Mc Donnell at
markmcdon2000 at yahoo.com and he will assemble the information and
possibly incorporate into this article.
Some History and Background
Mark Mc Donnell is the owner of Forexearlywarning.com. He started his forex
trading journey using the red and green light software from Globaltec. Many
of the Globaltec clients were using the red and green light software but
losing a lot of money or struggling scalping the forex on smaller time
As an employee of Globaltec, Mark developed the “Big Lights” method of
multiple timeframe analysis with a focus on the larger time frames and
trends to created many successful forex traders by guiding them through
and teaching them how to use multiple timeframe analysis of the spot forex.
Mark still teaches traders how to use this software but he also gives away a
set of free trend indicators that mimic the red and green light software and
he is also the developer of The Forex Heatmap®.
Free Trend Indicators
The Forex Heatmap®.
Many former clients of Globaltec other companies who owned the red and
green light software have now migrated to Forexearlywarning.com and use
his tools which are based in his background of using this software.
About This Training
This training consists of written text and links to some important
information. We also refer to the red and green light software package chart
library which has examples of all of the types of charts discussed.
Link to Chart Library Slideshow
Software Chart Reading – Part 1
The red and green light software is a trend analysis tool, nothing more. It is
setup with multiple timeframes and should be used by inspecting the largest
timeframes first for available trends. You call tell reasonably fast if the
market is trending or oscillating and use the additional time frames to set up
custom time frames for the current market.
Explanation of Software Algorithm
The mathematical algorithm behind red and green light software is fairly
complex. The red line and green lines are two summation formulas that are
historically and exponentially weighted. They are not moving averages but
can be fairly well mimicked by the moving averages supplied by
Forexearlywarning.com. Exponential moving averages are also exponentially
weighted so that is why they mimick the software so well.
Moving Averages to Mimick Software
On the software, the red line represents the sellers, green line represents
buyers. The summation formula for each line uses the open, high, low, and
close price and sums up the volatility count at each interval point to produce
the curves you see. The volatility count is “summed up” via the summation
formula and when you look at a chart you can view the red and green hits
on the “last” trade to see this in action so the mathematical algorithm is
estimating the buying and selling pressure.
Here is a snapshot of the volatility count as it is being measured in real time.
Snapshots of The Volatility Count Are In The Chart Library Slideshow
At a point of intersection of the red and green lines you have a crossover,
where the buyers or sellers take control, but only for that time frame. So if
you do have a new crossover it is always within in the context of the larger
trends and time frames. This is why you can use this software tool for
multiple time frame analysis of any forex pair.
All of the raw pricing data and volatility counts for each of the 7 time frames
comes from your data feed and is put into the two summation formulas and
continuous calculations are made with the two summation formulas to
produce the red and green lines.
The chip in your computer cranks out hundreds and some times over a
thousand calculations per minute on all of the price and volatility data from
the data feed through the summation formulas, and once again all of the
historical data is accounted for in the algorithm using exponential weighting.
All data points are accounted for but the data on the right side of each chart
is more significant due to this weighting.
Although the mathematical model of the red and green lines is fairly complex
the final display is simple, a red and green line. Whichever line one is on top
is the color of the light. The software is a mathematical model of the spot
forex. The software truly displays buying and selling pressure.
Summation formulas are statistical in nature, and you have a mean and a
standard deviation formula that can be used on forex pricing data and basic
price charts to draw regression channels through very easily. Breakouts of
the regression channels are represented by fresh crossovers on the time
The angle of the chart is proportional to the speed of the movement, and the
separation between the red and green lines is the disparity between the
number of buyers and sellers. More separation means a wider disparity
between the buyers and sellers. Increasing separation can also occur where
buyers far outweigh sellers or vice versa.
Snapshots of Increasing Separation Are In The Chart Library Slideshow
Software Chart Reading – Part 2
As we said in Part 1, the red and green light software is trend recognition
software, nothing more, nothing less. If you use it for anything else beside
that you are making a big mistake, if you use it to analyze trends you are
using it correctly. If you use it for anything else like scalping or trading the
news it won’t work.
The software is a tool, all tools even mechanical tools like hammers and
saws must be used correctly. Use the software to analyze trends which is its
intended purpose. For forex trade entries it is actually quite cumbersome
and it is not suited for this.
Interrelationship Between The Individual Charts and Time Frames.
If you start with the long term trend charts on the right and drill down to the
left you are expanding the right side of the chart you just looked at as you
drill down right to left. Each chart to the left forms a portion of the one you
just looked as you drill down. You are expanding or magnifying the right side
of the chart you just looked at as you drill down from the larger time frames
to the smaller timeframes. You are magnifying, expanding or zooming in on
the right side of the chart as you drill down from right to left.
An example of understanding the interrelationship between the time frames
is if you “zoom in” when taking a photo with a camera this is similar to
drilling down from right to left, except that you are only zooming in on the
right side of the previous chart to the right. Always drill down the 7 time
frames from right to left to understand the magnification concept.
A good or at least experienced red and green light software chart reader
should be able to look at the charts on the right and have a very good idea
of what at the ones on the left look like without looking at them and vice
versa. For example if the two major time frames on the right indicate a
strong uptrend going up, obviously the smaller time frames will be going up
all of the way across the page.
Chart Dynamics and Interval Update
The midterm and long term charts on red and green light software are
dynamic so go by what you see today; forget about what you saw yesterday
due to the dynamic nature of the charts. When I say the chart is dynamic
this means the entire profile can change, it does not always change but it
can, after the daily interval update.
The data changes at each and every data point on the chart by 20% on the
midterm chart and 4% on the long term chart, every day after the daily
interval update, the midterm and long term charts may or may not change.
If the profile does change if may be completely in your favor, like increasing
separation to indicate that the pair you have bought or sold will continue up
or down. The reason each data point changes daily at the interval update on
the entire chart is that as data is added on the right daily on the interval
update it has to be accounted for on all data points across the page, like
domino effect. This way the daily buying and selling pressure can be
measured and reflected in the charts.
The interval update is the main reason you should not be scalping with red
and green light software or using the software to trade the news. This is not
what the software was designed for. There are a lot of reasons why you
should not scalp the forex market anyway just add this to the list. The
reason you would not scalp with this software is the interval update lag on
each time frame on the red line.
All trend indicators have an interval lag of some sort but on the red and
green light software it is more pronounced. In this case the interval update
lag is good and can lead to a lot of pips, especially in the case of a “pacman”
on the larger time frames or any scenario where you have increasing
separation on a larger timeframe.
See Pacman Examples On The Chart Library Slideshow
A great chart reader also know what the charts look like on the right before
the interval update takes place, or should be able to give an educated guess.
Just take screenshots of the midterm and long term charts before and after
the interval update every day to see how the interval update and software
algorithm treat the data. If you are a software newbie this is critical.
Interval Update On The Smaller Timeframes
The interval update on the short term time frame as well as the minute time
frames is different from the interval update on the two largest time frames.
On the short term time frame and all of the minute charts the interval
update occurs once per time frame. On the short term time frame it would
be once per day, on the 90 minute time frame it would be once every 90
This is related to the interval update as well. On all time frames the green
line precedes the red line, mostly on price movement. Then after interval
update occurs, check the position of the red line to see if there is a trend
present or the red and green lines are skewed on that time frame.
Stumbling Upon Multiple Time Frame Analysis
When the red and green light software first was released almost all of the
users were scalping the smaller timeframes based on color changes due to
the poor instructions of GT, the software only had 4 lights, and everyone lost
money, it was pretty awful.
The big lights method was the name given to the method that red and green
light software users used to differentiate them from the traders who used
the smaller lights and time frames which were completely misused by many
forex traders for scalping. Scalping is wrong for a lot of reasons but the red
and green light software should never be used to scalp.
After I read the article from Kathy Lien about multiple time frame analysis, I
combined this with my experience in the stock market, options market and
Wizetrade (for stocks) background and I realized the GT clients were losing
money because they did not consider trading within the context of the larger
trend. The name “Big Lights” was coined for the red and green light software
for traders who utilized all of the time frames.
A reprint of Kathy Liens article is available here.
The big lights method IS multiple time frame analysis. It is a systematic way
of reading the software charts, you just repeat the process of drilling the
lights and charts daily or sometimes twice daily for full time traders if you
are a full time trader, Drilling down is very mechanical and consistent and
adaptable to trending or oscillating markets.
The forex market is dynamic, the charts on the red and green light software
are dynamic also, (i.e. interval update) and is the big lights method is also
dynamic. Expect change, the big lights method of multiple time frame
analysis is a rigorous analysis of the entire forex market. The big lights
method of multiple time frame analysis is based on 30 years of successful
use on the stock market and commodities market.
With multiple time frames we always know that we must inspect the larger
timeframes first to look for trends that could be starting, ending, or
established. Little trends are for little traders and scalpers, and big trends
are for big time traders, always drill down the charts and check for larger
Software Chart Reading – Part 3
Along with the article from Kathy Lien I wrote my own on multiple time
frame analysis. Please read both articles and you will be on your way to
drilling down the charts and thorough forex analysis.
Link To Article
If you are a big lights trader your mindset is different because of efficiency
of the forex market and high liquidity, everything is reflected in the charts.
You don’t need to pay attention to anything but the forex because the trend
is there for a reason. All of the forex news and fundamentals add up to the
larger trend. The forex market is the most efficient of all financial markets.
The price of oil, gold, direction of worldwide interest rates and any recent
news is always reflected in the charts. Keep your focus narrow and drill
down the charts. If the long term trend is in place you ARE a fundamental
trader, because you know the trends of the forex market.
At first the red and green light software is a foreign language, but a foreign
language can be learned, the information and charts in this article will act as
your interpreter. Smaller lights and time frames do not matter unless you
place them into the context of the big lights and trends which control the
overall movement of any currency pair. Even scalpers must know the trend
or they cannot survive. The mindset is that we respect the forex market and
we respect the trend, especially the higher time frames. We know when to
walk away from a set of charts where no visible trends or oscillations are
present, and we know that market choppiness causes a higher frequency of
As you drill down the charts and various time frames to expose the trends
and oscillations on a currency pair, some charts and time frames may
appear to be chaotic, skewed, or volatile and some may appear smooth on
the same pair. This is quite normal. If you see chaotic and braided charts on
the larger time frames just continue to drill down to smaller time frames and
oscillations will appear.
Some charts are not “readable” or orderly and while others are nice and
smooth and easily read. These conditions can change within the space of two
days. This is the benefit of the Big Lights method. You drill down the time
frames and determine the “most optimum time frame setup” customized for
each pair based on the current market condition, not the market condition
from last week. You expose the current market cycles and dynamics day by
The Mechanics of Drilling Down The Charts On the Red and Green Light
Setup 1 – Go to the “parameters” screen and setup custom indicator time
frames for all seven in this fashion:
630 660 690 720 SHORT MID LONG
420 450 480 510 540 570 600
210 240 270 300 330 360 390
30 30 60 90 120 150 180
Setup 2 – For a “quick look” at the market use this “generic” setup for the
seven time frames.
XX XXX XXX 720 SHORT MID LONG
Setup 2 will allow you to quickly see what is going on in the market and
after that you can do a more thorough drill down using setup 1 if you wish.
Do not use any of the preset time frame packages and setups that come
with the software none of them make any sense. They are misleading. Also,
do not forget about the parallel and inverse positioning of pairs. If you really
want to analyze the USD/CHF for example you would want to examine
several USD pairs and several CHF pairs across the time frames. When
setting up the software group pairs by individual currency to facilitate this.
Setup the software with all of the pairs comprised of the 8 major currencies
only, i.e., NZD, AUD. JPY, EUR, CHF, GBP, USD and CAD.
What should you be looking for in a typical big lights trade?? Start by
inspecting the four largest timeframes (720 minute and larger) on all of the
pairs comprised of the 8 major currencies. Look for major trends that are
developing or already established. If a currency pair is not trending or trying
to build a trend then continue drilling down the charts looking for
oscillations. That’s it, do not get confused or make it complicated. You are
looking for trends or oscillations on the major time frames. If you see trends
or oscillations then drill down all of the time frames looking to optimize your
chart setup for the current market conditions.
See Examples of Trending Pairs On The Chart Library Slideshow
Trending pairs must have a foundation light or time frame of a short term
chart as a minimum in other words the short term trend must be established
to qualify for a trend, after that a midterm or long term trend with
separation up or down also qualifies as a “trending pair” just on a higher
An oscillating pair one that is is cycling up and down in smooth and clear
trade-able waves. Pairs can oscillate on virtually any chart or time frame but
720 minutes oscillations or larger should only be considered for trading,
don’t mess around with small oscillations because the money management
ratio of risk to reward is too small. After you drill down all of the time frames
try to determine which trend channel describes the oscillation the best, this
is your main oscillation channel. When a pair is oscillating always determine
main oscillation channel by drilling down then, measure the amplitude (or
range) from the top to the bottom of the oscillation cycles and estimate the
pip potential. Then decide if you should trade it or not.
See Examples of Oscillating Pairs On The Chart Library Slideshow
Oscillations on currency pairs occur frequently, in non trending markets or
after long movement cycles. A library of oscillating pairs is available in the
Software Chart Reading – Part 4
The big lights method of multiple time frame analysis is a consistent and
repeatable method, you can identify an orderly or chaotic (choppy) market
quickly. You can identify trends and oscillations quickly as well. You always
know whether or not to buy or sell or stay out of a particular pair, and you
always analyze each pair thoroughly by analyzing other pairs in the same
parallel and inverse or individual currency group. You can also get into the
habit of analyzing currency pairs in groups and set up parallel and inverse
pairs on the platform and analyze them together.
With the big lights method you are using the different time frames to
statistically smooth out the data and always looking for orderly movement
and consolidation cycles or smooth waves. If the movement cycles are
choppy and chaotic that’s not bad all by itself but better timing would be
required and more time in front of the computer.
Sometimes a trend does not exist on the larger time frames and the charts
are oscillating in a tight range. If no trend exists on a pair the trend will start
building from the smaller time frames on the left, like 90 to 150 minute
charts. Trends start and end with the smaller time frames and trends always
start and end off of support and resistance.
If a currency pair is in a fairly tight range it can breakout on the smaller time
frames. Look at the snapshots titles “Breakout” and Range Breakout on
these two links below. These pairs in the pictures are trading sideways then
breakout to the upside.
Snapshots of Range Breakouts are in the Chart Library Slideshow
If you are not able to catch the first movement cycle and breakout into a
new trend it does not matter that much because you can still catch the
second movement and everything beyond that. Let the trend establish itself
then catch the second move if you like. Then when you enter the trade you
can add extra lots.
This is the way currency pairs move >>>> Movement, consolidation,
movement, consolidation, movement, consolidation, etc. You write a trading
plan for the next move during the consolidation periods. Now that you know
the interrelationship between the smaller and larger time frames you should
be much improved at judging the consolidation cycles, which generally occur
between the end of the US session all the way through the Asian session.
You can supplement your basic software chart reading and drilling down the
time frames, a minor amount of basic chart technical analysis can also be
included. For example knowledge of basic flags, pennants, double tops and
double bottoms occur frequently on basic currency charts and this should not
See Lesson 19 on Chart Patterns
Green Line Convergences
On the red and green light software a convergence is when the green line
moves strongly towards the red line. Short term time frame green line will
begin to converge because the smaller minute time frames/charts make one
counter cycle against the existing trend, then the smaller trends consolidate,
then on the second movement of the smaller trends against the existing
trend the short term chart crosses, it takes two daily interval updates to
finish the short term time frame crossover, in most cases.
The convergence of the green line towards the red line means that the pair
has made one counter cycle against the previous movement. Then you have
the daily interval update, then the next movement occurs against the trend
and the short term time frame has a fresh cross.
“The first countercycle causes the convergence and the second countercycle
causes the cross.”
The counter-cycles are indicating that the short term trend is ending
See Examples of Convergences On The Chart Library Slideshow
The definition of a trending pair is that short term time frame trend chart is
separated, or building a fresh cross, at a minimum. If the midterm or long
term time frames are fully separated this is also a trending pair.
If a currency pair is oscillating we would like to see a minimum of a 720
minute chart cycling up and down to be considered oscillating so there are
ample pips for trading.
Difficulty of Different Types of Trades
Oscillations and fresh crosses on short term time frames or larger are easier
to trade, also pairs in strong trends with the midterm and long term trends
fully separated are easy to trade. Bounces are the most difficult types of
trades and newbies should stay away from these at the outset. Bounces are
discussed on this blog in a separate post. Newbies should paper trade then
trade micro lots on oscillating pairs, fresh crosses and strong trending pairs
only to build confidence and to prove that red and green light software trend
Let’s learn to understand the pacman, and what they mean. A pacman is
when the red and green lines are pointing up and down in opposite
directions on the last interval on the right on any time frame. A pacman
indicates volatility or potential movement in the opposite direction of what
just occurred. The green line is pointing in direction of the most recent move
on all pacmen.
A pacman on a larger time frame might be a pacman on a long term or
midterm chart that will help you to recognize the larger time frame
oscillations much better. When you see a pacman on a daily (short term)
time frame the 90-180 minute light should start to cycle in the opposite
direction of what it just did.
A pacman on a smaller time frame (entry pacman) might be on the two or
three smallest charts on the left of your 7 time frame setup, assuming the
larger trends are stable. This indicates that the smaller time frames are
volatile even though the longer term trend may be in place. In this case you
would wait for a cycle against the trend to enter a trade with a small pacman
on the left. When you have a small time frame pacman a conventional chart
will look like the illustrations below (smooth and choppy trends). This is
because a pacman is a sign of volatility and, conversely, volatility is a sign of
Snapshots of Pacmen are in the Chart Library Slideshow
A bounce is when the red and green lines are parallel and very close to each
other. The green line is on top and the currency pair moves up, causing the
green line to rise while the red line holds steady. The green line “bounces”
up off of the red line.
The opposite is when the red and green lines are parallel with the green line
on the bottom and the price on the pair drops, causing the green line to drop
and separate from the red line creating the good separation you need to
stay in the trade. The green line bounces off of the red line again but
downward this time.
Bounces are the most difficult type of chart to read for new users of the red
and green light software. They are difficult to interpret and trade until you
have some experience. Newer traders trading real money have a tough time
with these. Wait until you have more experience before trying to trade
bounces. This is because when a currency pairs goes through a long
sideways consolidation the red and green lines come together with little bit
of white space in the middle making the charts and red and green line
indicators tough to read.
When the red and green lines are close together a potential bounce can
become a pacman quickly. If the red line with the green line are close
together and the green line is barely above the red line the illustrations
below show you what can happen if the price moves up (bounce) or down
(pacman). Expect a bounce in the direction of the trend but it could go the
opposite way on a shorter term basis, wreaking havoc on the entry and the
charts. Tools like the forex heatmap should always be used to verify entries
but especially with bounces or situations where the red and green lines are
Snapshots of Bounces are in the Chart Library Slideshow
Review all charts with the word “Bounce” in the title, most of these are for
software but the same bounce principle applies to the exponential moving
averages we use to mimic the red and green light software.
To accompany this written training we have prepared a slideshow on
Slideshare Please refer to this slideshow and you will see example charts of
every type of chart listed in the text.
Link to Slideshow
Low Cost Alternatives to The Software
If you like the red and green light software but do not have the funds to pay
for it or like to keep your costs low here are some low cost alternatives.
To substitute for the charts you can use the free trend indicators provided by
Forexearlywarning.com. There are not as many timeframes but 8 of the
timeframes match up with the software pretty well.
Link to Free Trend Indicators
To substitute for the lights but in a much more logical way that is easy to
read to verify your trade entries you can also use The Forex Heatmap®
which is available to subscribers of Forexearlywarning.com for $19.95 per
Link to The Forex Heatmap
With Forexearlywarning.com you also get daily forex trading plans. All of this
is substantially cheap compared to the software and the trading plans and
heatmap make for a complete package of forex services at a very low cost.
If you still use the Red and Green light software we are happy to bring you
these free training materials. Using the software as an analytical tool is
perfectly acceptable but it is very expensive and inexpensive alternatives are
offered by Forexearlywarning.