A newer version of the MACD indicator called Impulse MACD can identify trends and eliminate false signals for non-trending markets, reducing losses. Adding overbought and oversold levels to the indicator can help identify major crossovers for higher win rates. Dragging a mouse above and below the middle line and using alt+h can position the overbought and oversold lines. Only take positions from crossovers outside of these lines to ensure the price is overextended. For risk management, set stop loss below the nearest swing low and profit target at one and a half times the stop loss.

The Impulse MACD Indicator: A New Way to Trade

Introduction: The Classic MACD Indicator

The moving average convergence divergence (MACD) indicator is widely used among traders and investors alike as it is one of the oldest and most popular indicators ever created. The MACD is a trend-following momentum indicator that helps identify potential market trends by displaying crossovers between two lines – the Blue Line (MACD line) and the Orange Line (signal line). When the MACD line crosses above the signal line, it indicates an uptrend and a good buying opportunity; conversely, when the MACD line crosses below the signal line, it indicates a downtrend and a good selling opportunity.

However, one major problem with the classic MACD indicator is that it only works on trending markets, and markets are not always trending. For instance, when the market moves sideways or within a range, the MACD gives false signals, which could accumulate and slowly wipe out profits and even bring an account towards the negative.

The Impulse MACD Indicator

However, there is a new version of the MACD indicator that is almost three times more profitable than the older version and helps us identify trends while eliminating false signals when the market is ranging. The impulse MACD is a newer version of the MACD and is a momentum indicator that detects trends by displaying crossovers between the MACD line and the signal line like the classic MACD. But unlike the classic MACD, the impulse MACD filters out false signals, indicating a flat line when the market is ranging.

How to Apply the Impulse MACD Indicator?

To apply the impulse MACD indicator to your charts, you need to open the trading platform you are using and search for “impulse MACD” in the indicator section. Choose the impulse MACD from the Lazy Bear and apply it to your chart. You can then customize the appearance of the indicator to suit your preferences using the settings and style options.

Understanding the Impulse MACD Indicator

The impulse MACD indicator includes four components: the impulse MACD line (blue), the signal line (orange), the histogram, and the middle line. As in a classic MACD, you can identify trends by looking at the crossover between the impulse MACD line and the signal line. A crossover of the impulse MACD line above the signal line indicates upward momentum, while a crossover of the impulse MACD line below the signal line indicates downward momentum.

However, when both lines go flat, indicating that the market is ranging, you should avoid taking any positions.

Strategies for Trading the Impulse MACD Indicator

One way to use the impulse MACD indicator when trading is by applying overbought and oversold levels. This allows you to take positions only from crossovers that occur outside of these levels since prices that are overextended will have a higher chance of making significant major moves.

To apply overbought and oversold levels in your charts, you can manually add them above and below the middle line of the impulse MACD indicator, respectively. For instance, drag your mouse above the middle line and press Alt + H or add the lines manually, then repeat the process below the middle line to add the oversold line.

Determining the Placement of Overbought and Oversold Levels

To determine the placement of your overbought and oversold levels for your impulse MACD indicator, you need to zoom out of your chart to separate major and minor crossovers.

Minor crossovers happen closer to the middle line, while major crossovers happen further from the middle line. Draw a horizontal line to separate the major crossovers from the minor ones. The minor crossover should be contained below this line, while the major crossover should be contained above it. This placement will be your overbought line.

For your oversold line, drag your mouse to below the middle line and place it at the negative of your overbought line.

Trading Strategy Based on Impulse MACD Extension

An advanced trading strategy you can use with your impulse MACD indicator is called the impulse MACD extension. This strategy has a higher win rate and involves taking positions only if the impulse MACD crosses over upwards or downwards, but the crossover needs to occur below the oversold line and above the overbought line.

Crossovers inside the lines should be ignored since the strategy needs to ensure that the price is overextended to increase the chances of making significant moves.

To implement the impulse MACD extension strategy in your trading, set your stop loss below the nearest swing low and the profit target at one and a half times your stop loss.

Conclusion:

In sum, the classic MACD indicator is widely used among traders to identify potential market trends. However, it has some limitations, especially when markets are ranging, preventing it from producing accurate signals. The impulse MACD indicator is a new version of MACD that displays momentum while filtering out false signals that occur when the market is ranging. You can use advanced strategies like the impulse MACD extension to make more informed decisions and increase profit potential.