The Elder Impulse System is a trading tool designed to identify periods when both the trend and momentum are aligned. It uses a combination of a moving average and the MACD histogram to gauge market "impulse"—the willingness of buyers and sellers to drive the price further. This article focuses on using the Elder Impulse System to identify potential pullback trading opportunities.

Overview

The system paints price bars in different colors based on two criteria: the direction of a moving average and the MACD histogram. Typically:

• Green: Moving average is up, and MACD histogram is rising (bullish impulse).

• Red: Moving average is down, and MACD histogram is falling (bearish impulse).

• Blue/Gray: Indicates indecision or conflicting signals (neutral).

The idea behind using it for pullbacks is to identify strong trends (strings of green or red bars) and then look for short-term counter-trend moves (pullbacks) as potential entry points in the direction of the main trend.

When It Helps

This system can be particularly helpful for:

• Trend Following: Identifying entries in the direction of an established trend after a temporary pullback.

• Filtering Noise: Helping to avoid entering trades during periods of market indecision or consolidation.

• Visual Confirmation: Providing a quick visual assessment of the current market momentum.

It's less effective in choppy, sideways markets where the signals can become erratic. It's best suited for markets exhibiting relatively clear trends.

How To Try

Most charting platforms, including TradingView, have the Elder Impulse System as a built-in indicator.

1. Add the "Elder Impulse System" indicator to your chart.

2. Observe the colored bars.

3. Look for a series of bars of the same color (e.g., green) indicating a strong trend.

4. Identify a pullback – a temporary move against the trend, often signaled by a bar of a different color (e.g., red after a string of green).

5. Consider this pullback a potential entry point to trade in the direction of the original trend.

Key Settings

The two primary components of the Elder Impulse System are the moving average and the MACD.

• Moving Average Period: This determines the sensitivity of the trend filter. Common values are 13- or 26-period EMAs. Shorter periods react faster but may generate more false signals.

• MACD Settings: These control the MACD histogram calculation. Standard settings (12, 26, 9) are often used, but adjustments can be made to fine-tune the indicator's sensitivity.

Experiment with these settings on a demo account to find what works best for your trading style and the specific market you are trading.

Tips & Risks

• Confirmation is Key: Don't rely solely on the Elder Impulse System. Use other indicators or price action analysis to confirm your entry signals.

• Manage Risk: Always use stop-loss orders to protect your capital. Place stops below swing lows for long entries and above swing highs for short entries.

• Discipline: Stick to your trading plan and avoid chasing trades (FOMO).

• Patience: Wait for the pullback to develop before entering a trade.

Quick Checklist

• Add the Elder Impulse System to your chart.

• Identify a strong trend (series of green or red bars).

• Look for a pullback (bar of a different color).

• Confirm the signal with other indicators/analysis.

• Set a stop-loss order.