The Elder Impulse System was designed to identify when the trend is really "taking off". When you think "Impulse", think the energy to launch a rocket. When the system triggers, you should be thinking rocket, and expect the market to be really "taking off"...!!!
This trading system was developed by Alexander Elder. According to its author, "the system identifies inflection points where a trend speeds up or slows down".
Basically, the system is based on two indicators:
- a 13-day Exponential Moving Average, that identifies the trend;
- the MACD-Histogram, to measures momentum (based on MACD(12,26,9));
This unique system combination was color coded into the price bars for easy reference, giving origin to a useful indicator that combines trend following and momentum, to identify tradable market impulses.
After this short introduction, I will explain how the Elder Impulse indicator is calculated and what are its inputs and outputs. When we attach this indicator to a chart, instead of two color candles, as normally we are used to seeing (bullish and bearish candles), they will appear with a third color, which helps us to identify when the trend is slows down.
1-GREEN PRICE BARS:
13-period EMA > previous 13-period EMA
MACD-Histogram > previous period's MACD-Histogram
2-RED PRICE BARS:
13-period EMA < previous 13-period EMA
MACD-Histogram < previous period's MACD-Histogram
3-BLUE PRICE BARS:
Price bars are colored blue when conditions for a Red Price Bar or Green Price Bar are not met
If first condition is true, the corresponding price bar is colored green (indicating bullishness).
If second condition is true, the corresponding price bar is colored red (indicating bearishness).
If the signals are mixed, the price bar is colored blue (indicating uncertainty).
- Here's an example of an H1 chart with the Elder Impulse System Indicator:
- image-1 - Elder Impulse System Indicator - MT4
This indicator can be used in almost all timeframes with good trading results, but what Elder suggests is that trading should be in line with the Main Trend. One method of using this, is to use 2 timeframes for signal confirmation. So if you are trading the Daily chart, if the impulse system is showing an entry, multiply your timeframe by 5 and check that chart to see if the impulse system is also showing the same entry direction. In this case, you would be using the Daily and Weekly charts. In other words, the weekly chart has to show a clear uptrend in order for a daily buy signal to be valid. On the other hand, the weekly chart has to show a clear downtrend in order for a daily sell signal to be valid. We can also use as filter an EMA-60 , where BUY orders are put above the EMA and SELL orders below the EMA.
The Reason behind this article:
A few weeks ago, while I researching the Dukascopy forum, I found a member of this community asking to translate this indicator from MT4 to JForex in this topic: http://www.dukascopy.com/swiss/english/forex/jforex / forum / viewtopic.php? f = 7 & t = 48778 & _dc = 864. I'm rather curious and unaware of all this indicator, I decided to download it from the forum and convert it to JForex through MQL-Coverter.
After a few minutes, I had the indicator ready to work on JForex platform , at first everything seemed fine, but when I started looking more closely, I saw that the indicator was not working properly. I tried to see what was going wrong, but without success, so I decided to write this article, because I do not currently have the time available to fix the indicator. So if there are any interested member who wants to try to fix it, it would be great.
As you can see in the image that follows, the indicator after been converted through JForex MQL-Converter is not operating as in MT4. So once again, I call attention to members who use indicators and EAs converted to verify if they are functioning as they should.
- image-2 - Elder Impulse System JForex Converted
Alexander Elder notes the following: "The Impulse System encourages you to enter cautiously but exit fast. This is the professional approach to trading, the total opposite of the amateur's style. Beginners jump into trades without thinking too much and take forever to get out, hoping and waiting for the market to turn their way."