The Elder Impulse System Indicator (EIS) is a technical analysis tool that combines two different indicators and turns them into a dynamic trading system. Traders might apply it to determine optimal entry and exit points, as well as to spot a potential upcoming trend reversal.
Being a dynamic trading system on its own, it can also be combined with other technical analysis tools. The Elder Impulse System Indicator may be applied to any CFD asset and any time frame. Read the full article to answer the question “What is Elder Impulse System?” and understand how it may be applied to your trading approach.
How does it work?
As already mentioned, the Elder Impulse System is a combination of two indicators: a 13-day exponential moving average (EMA) and a MACD-Histogram. Both have a function of their own. The EMA is aimed at spotting the trend, while the MACD-Histogram might identify the momentum (the rate of the rise or fall in prices).
The Elder Impulse System Indicator is represented as a series of bars under the price chart.
Green bars correspond to the periods of bullish market, when both the trend and momentum are positive. Red bars, in turn, correspond to the periods of bearish market, when the trend is going down, but momentum is still growing. Grey bars correspond to mixed indications, when neither bulls no bears dominate the market.
How to apply this tool in trading?
There are several ways to apply the Elder Impulse System Indicator in CFD trading.
1. Using Elder Impulse System Indicator on its own
Some traders might use the indicator as a self-sufficient trading tool. When several green bars appear in a sequence, the market may be considered bullish. When the opposite is true, and several red bars appear one by one, bearish sentiment might be prevalent. At this point, some traders might consider opening the deal in the corresponding direction.
You should, however, note that this indicator is incapable of determining the trend duration. It is, therefore, impossible to tell when the prevailing trend will come to an end. Volume indicators might help, as the trading volume is generally higher during the initial phases of strong trends.
When trading with the EIS alone, it may be wise to wait for a confirmation. In this case, a confirmation may be detected when 2–3 consecutive bars of the same color are observed. Although the Elder Impulse System can be used on its own, it is still possible to combine it with technical analysis indicators of different types: volatility, volume, etc.
2. Using Elder Impulse System Indicator in combination with other tools
You may also choose to use the EIS as a supportive tool for other indicators. Let’s say you are trading with an Alligator as your primary tool. In this case, you can still consult the Elder Impulse System in an attempt to avoid potential false indications. Using two indicators to confirm each other’s readings might help to manage potential risks in case of a losing deal. However, keep in mind that no indicator can offer 100% reliable information, so consider using other risk-management tools as a part of your trading practice.
This is what Alexander Elder, the man behind the EIS, said about this indicator:
“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.”
It is worth remembering that Elder Impulse System, as any other technical analysis tool, is incapable of sending accurate indications 100% of the time. From time to time, it may — and will — provide you with false indications. It is your task, as a trader, to identify and filter them out.
How to set up the Elder Impulse System Indicator on IQ Option?
Setting up the indicator is easy. In order to do so, follow the steps below:
1. Click on the ‘Indicators’ button in the bottom left-hand corner of the traderoom.
2. Go to the ‘Trend’ tab,
3. Choose the Elder Impulse System from the list of available options and click ‘Apply’ without changing the setting.
The indicator is now ready to use. Note that may can also adjust the settings according to your preference. However, be sure to understand your goals before changing the default settings to avoid potential negative results.
Hopefully, this article has helped you answer the question “What is Elder Impulse System?” and figure out how it may contribute to your trading approach. It’s always a good idea to test different instruments to find the ones that work best for you. So don’t be afraid to expand your toolkit and apply new indicators, as they might be precisely what you’ve been looking for all along!
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