The impulse MACD is a modified version of the traditional MACD and tells about the trend direction. The indicator uses exponential moving averages to plot the signal line.
This guide will talk about the impulse MACD is and how you can trade with it.
What is the impulse MACD indicator?
The impulse MACD is a trend-following indicator that shows the relationship between price and moving averages. The indicator uses exponential moving averages (EMA) to plot the signal line, which moves along with the price.
As a momentum oscillator, the impulse MACD oscillates between a certain range, where zero acts as a middle point. Whenever the price crosses above or below the zero point, it suggests the direction of the trend.
The indicator plots bar in addition to the signal lines. The bars suggest the trend’s direction. If the price moves downward, the impulse indicator will show downward bars. On the other hand, if the price is moving upward, the indicator’s bars will be upwards.
How to trade the impulse MACD indicator?
Trading with the impulse MACD is super simple. All you have to do is locate the upward and downward bars. If the bars start moving upwards and the signal line is upward, too, we can take our long positions.
Conversely, if the bars start moving downwards and the signal line is downwards, too, we can take short positions.
For the strategy, you can set the indicators to default settings or adjust them according to your preference.
The chart above shows that when the price starts moving upwards, the impulse MACD shows upward bars. A key point to add here is that you might want to wait and take positions after the 3 or 4 successive bars and then think about taking an entry. It acts as a confirmation, so we can confidently enter the trade at this stage.
Although the indicator can work on its own, you can apply other indicators and price action analysis for further signal confirmation.
The good thing is impulse MACD works on all timeframes. However, it’s best to apply it on longer timeframes to try and remove some of the market noise from short term chart timeframes.
Buy Signal
- The bars must be above zero point.
- You should wait for the impulse indicator to draw 3 or 4 successive bars and then enter the trade.
- You could set take-profit at the recent high or exit the trade when the impulse MACD doesn’t show upward bars.
- You could set stop-loss at the recent low.
Sell Signal
- The bars must be below the zero point.
- You should wait for the impulse indicator to draw 3, or 4 successive bars and then enter the trade.
- You could set take-profit at the recent low or exit the trade when the impulse MACD doesn’t show downward bars.
- You could set stop-loss at the recent high.
Conclusion
The impulse MACD is a simple oscillator that works similarly to the traditional MACD indicator. The slight difference between the two indicators is that the impulse MACD moves along with the price and plots upwards and downward bars. Whereas the MACD shows price divergences.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
