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Bana View Drop Down
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Posts: 46 		Post Options Post Options   Quote Bana Quote  Post ReplyReply Direct Link To This Post Topic: Impulse
    Posted: 11 May 2010 at 4:57pm

I have been using Dr Alexander Elder trading strategy (triple screen) using the impulse indicator and channels (“Come into my Trading Room”).

 

The entry point (3rd screen) is defined by the impulse indicator.

 

Background of impulse indicator

1. When the moving average and the MACDH are both ticking up, it indicates bullish momentum. The impulse system prescribes that you can go long but it is not advisable to go short.

 

2. When the moving average and the MACDH are both ticking down, it indicates bearish momentum. The impulse system prescribes that you can go short but it is not advisable to go long.

 

3. When the moving average and the MACDH are not in sync, bulls and bears are neutral. Do whatever. 

 

Impulse is included in Bullchart indicators but is not attached to the author (Elder). You can find it under “all indicators’. For visual representation, the price bars are colored for each of the 3 conditions. Eg - bullish (green), bearish (red) and neutral (yellow).

 

Anyway, coming back to my question/problem at hand –

 

I want to be able to figure out the value at which situation 1 and 2 will cease to exist (on any time period – daily or weekly).

 

For example –

 

1. When the moving average and the MACDH are both ticking up, it gives a buy signal. However, how much will the price have to decline for either the moving average or the MACDH to decline instead of rise, which will then negate the green impulse?

 

2. When the moving average and the MACDH are both ticking down, it gives a sell signal. However, how much will the price have to rise for either the moving average or the MACDH to rise instead of decline, which will then negate the red impulse?

 

The ‘forecast’ value of change indicator can be marked by an icon on right side of the last bar.  

 

 

Why I think this will be useful?

 

Say I have done my homework on screen 1 and 2 and found a nice bearish divergence developing which I want to trade. However, the impulse is still green meaning there is still bullish momentum and it might not be the right time to go short yet. However, the green impulse might cease to exist during a trade day but I cant be there watching the screen intra day (screen 3) to enter.

 
If I know in advance at what price I am not prohibited by the impulse system to enter, I can place conditional orders.

 

Same applies for bullish divergence.

 

In situation 3, neutral bar, it is not that important to know the turning point of the impulse since momentum if neutral. There is no prohibition on entering. However, if trend trading, it will be useful to know at what price the MA and MACDH will sync in same direction, confirming the continuation of a trend and hence an entry point.

 
Any help on creating the indicator signal is welcome.
 
Cheers

Bana
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maximo View Drop Down
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Posts: 232 		Post Options Post Options   Quote maximo Quote  Post ReplyReply Direct Link To This Post Posted: 12 May 2010 at 5:38pm
Hi Bana,
 
I've created a Rate Of Change indicator to determine how much the price must move in order for the Moving Average to be facing up or down.    The zero line represents the 13 ema as being flat, so I worked out the change from it being flat will give the price value required to change the bar colour.     Now all thats needed is to indicate this on the price bar(s) with marker point(s).
 

[Description="Rate of Change of EMA"]

EMA := input("EMA period", 13, 1, 40);

exponent:= 2/(EMA+1) *.5;

[color=lime green]

roc(ma(C,EMA,E),1,%) * exponent * Close;

[color=gray]

0;



Edited by maximo - 12 May 2010 at 10:47pm
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Posts: 232 		Post Options Post Options   Quote maximo Quote  Post ReplyReply Direct Link To This Post Posted: 12 May 2010 at 6:15pm
 
 Apply this modified impulse indicator to chart and the dots on the bars represent the level at which the price needs to close at or above or below in order to change the bar colour. ie. The ‘forecast’ value .
 
Looking at COH the impulse indicator has been changing frequently around the EMA.
 
The last 6 lines are the mod.
 
if you want only the last dot plotted let me know..  it's interesting to see all the dots plotted, because you can see that any Close thats 3/4's of 1 percent either side of the EMA(13) will cause a change of bar colouring. 
 

[description="Elder Impluse."]

[citation="Dr. Elder - Come Into My Trading Room, p.157-162 Copyright (c) 2002, John Bruns and Financial Trading Inc."]

[target=Price; linestyle=PriceColor]

macShort := input("MACD Short MA", 12, 1, 100);

macLong := input("MACD Long MA", 26, 1, 100);

macSmooth := input("MACD Smoothing Period", 9, 1, 100);

EMA := input("Short EMA", 13, 1, 40);

macTime := input("Time Ratio", 1, 1, 22);

macShort2 := macShort*macTime;

macLong2 := macLong*macTime;

macSmooth2 := macSmooth*macTime;

EMA2 := EMA*MacTime;

mac := ma(C,macShort2,E) - ma(C,macLong2,E);

macSig := ma(mac,macSmooth2,E);

macplot:= (mac-macSig);

impulse2 := if(macplot >= hist(macplot, macTime), 1,0) + if(C > ma(C,EMA2,E),1,0)-1;

[color=Blue; name=Zone 1]

impulse2>0;

[color=Red; name=Zone 2]

impulse2<0;

[color=Black; name=Zone 3]

true;

{Come Into My Trading Room page 157-162}

[color=lawn green; linestyle=solid]

ma(C,EMA,E);

{ Plot a dot where price would have to move in order to change bar colour, Max}

exponent:= 2/(EMA+1) *.5;

dot:=roc(ma(C,EMA,E),1,%) * exponent * Close;

[linestyle=points; color=dodger blue]

if(dot < 0 ,C-dot,undefined);

[linestyle=points; color=coral]

if(dot > 0 ,C-dot,undefined);



Edited by maximo - 13 May 2010 at 2:39am
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Posts: 46 		Post Options Post Options   Quote Bana Quote  Post ReplyReply Direct Link To This Post Posted: 13 May 2010 at 10:16am
I just got I one word to say ---- WOW.
 
This is exactly what I need.
 
thanks a ton maximo.
 
I will post some examples of its application in next couple of days.
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Posts: 46 		Post Options Post Options   Quote Bana Quote  Post ReplyReply Direct Link To This Post Posted: 13 May 2010 at 2:39pm

Hello Maximo

 

I have hit a stumbling block with the indicator you have created – lets call it the “iforecaster”.

 

It does not appear to be showing the correct values at which the bar will change color. I am having trouble attaching image. So I will try to describe the issue using this indicator on XKO weekly chart as an example.  

  

Week of 10/08/09. Impulse is bullish. The iforecaster shows value of 3844 at which impulse should change color. However, the next bar (17/08/09) changes color to neutral while remaining much above the iforecaster dot value.

 

The bar of 24/08/09 again changes from neutral to bullish with the iforecaster, showing a much lower value.

 

The impulse changes again to neutral and then to bullish in next 2 bars while remaining much above the iforecaster value.

 

I think the reason for this is that iforecaster does not take into account the MACDH movement. In above cases each time the bar turned from bullish to neutral, it was because of MACDH ticking down while MA was still rising.

 

First I thought the above issue related to bars turning to neutral and back. But then I noticed, bar of 11/01/10 which has bullish impluse with iforecaster value of 4682. However, the next bar turns to bearish impluse while remaining above 4682.

 

I know above narration might be confusing. If you can PM me your email id, I can send you my chart.

 

 

The bearish divergence on XKO weekly was confirmed on bar of 19/04/10 which it turned from bullish to neutral. This is an example of a chart where a conditional order can be placed at known value where bullish impulse conditions would cease to exist.  

 

Kind regards

BAna

 

 
 


Edited by Bana - 13 May 2010 at 2:42pm
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Posts: 232 		Post Options Post Options   Quote maximo Quote  Post ReplyReply Direct Link To This Post Posted: 13 May 2010 at 10:19pm
Hi Bana,
 
The forcast values are for the red & blue colours only and do not include neutral bars which are neutral because only the MACDH has changed direction and not the small EMA(13).    When both the small EMA(13) changes direction from up to down and the MACDH also changes direction, only then will a bar change colour to either blue or red.   Remember  the bar must also close at or below the predicted value to change as well.  If it touches the predicted value and doesn't close on the opposite side then it will be coloured neutral as per impulse logic.
 
Hope I've cleared it up, I can always PM.
 
Max
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Posts: 46 		Post Options Post Options   Quote Bana Quote  Post ReplyReply Direct Link To This Post Posted: 13 May 2010 at 11:08pm
The forcast values are for the red & blue colours only and do not include neutral bars which are neutral because only the MACDH has changed direction and not the small EMA(13).    When both the small EMA(13) changes direction from up to down and the MACDH also changes direction, only then will a bar change colour to either blue or red.
I understand this part and have contemplated on it in my post above. Thanks for confirming it.
 
Can MACDH movements be factored into the formula to forecast the neutral zone. It is quite infrequent that trade turns bullish to bearish (or vice versa) straight away. And when it does, it usually moves far quickly for a decent entry. The neutral zones represent good entry points.
 
Remember  the bar must also close at or below the predicted value to change as well.  If it touches the predicted value and doesn't close on the opposite side then it will be coloured neutral as per impulse logic.
 
This is what I thought is happening. But set the following parameters-
MACDH Short MA - 11
MACDH Long MA - 25
MACD Smooting period - 8
Short EMA - 12
Time ratio - 1
Chart - XKO weekly
 
The bar of 11/01/10 has bullish impluse. The dot value is 4682.674.
Next bar of 18/01/10 turn bearish impluse. However, it closed above the previous bar's dot value of 4682.674. Even the low of 18/01/10 did not cross below the dot value.
 
You will find another pair of bars with similar situation on 03/12/07 and 10/12/07.
 
This is where I got confused about its accuracy.
 
There were 2 instances where impluse turned from bearish to bullish in next bar. Here the forecast dot value seemed correct - 06/07/09 and 23/11/09.
 
cheers
Bana


Edited by Bana - 14 May 2010 at 10:24am
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Posts: 232 		Post Options Post Options   Quote maximo Quote  Post ReplyReply Direct Link To This Post Posted: 14 May 2010 at 1:57pm
I will have a look with those indicator settings.  It seems we are missing something though, like the predicted value is being calculated and displayed from the current bar EMA and it's position will change the very next bar due to recalculation of the EMA with 1 more bar being added.   For example if the trend is rising, the next actual dot would be carried slightly higher, depending on the strength of the trend.  We can't actually see the current dot value either, since it's a predicted value for the next bar.
   I based the predicited value on half the current bars exponent percentage.  A median calculation of this is the best we can achieve, since price can go either way.   You can define the margin of error as half the exponent.   This would be half the distance between a dot and the EMA.  Not a lot, but worth noting that predictions are not certainties.
 
 
Max


Edited by maximo - 14 May 2010 at 10:20pm
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"worth noting that predictions are not certainties"
 
Hello Max
 
Apologies if I have unintentionally conveyed that I am trying to 'predict' price movement. I am not.
 
Since EMA and MACDH are both mathematical derivation of price, it should be a matter of using the same mathematical principle to 'forecast' the likely movement in EMA based on price. Sounds simple when I say it, but I acknowledge it is a complex mathematical problem.
 
I will try to illustrate this by using numerical data in spreadsheets. 
 
Thanks for your time.
 
Cheers
Bana


Edited by Bana - 15 May 2010 at 9:18pm
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Posts: 232 		Post Options Post Options   Quote maximo Quote  Post ReplyReply Direct Link To This Post Posted: 16 May 2010 at 3:38pm
G'day Bana
 
I've managed to reduce the margin of error to nearly zero.
The only time a bar remains a neutral colour is when the MACDH is not
confirming the current trend or change of trend.
 

[description="Elder Impulse."]

[citation="Dr. Elder - Come Into My Trading Room, p.157-162 Copyright (c) 2002, John Bruns and Financial Trading Inc."]

[target=Price; linestyle=PriceColor]

macShort := input("MACD Short MA", 12, 1, 100);

macLong := input("MACD Long MA", 26, 1, 100);

macSmooth := input("MACD Smoothing Period", 9, 1, 100);

EMA := input("Short EMA", 13, 1, 40);

macTime := input("Time Ratio", 1, 1, 22);

macShort2 := macShort*macTime;

macLong2 := macLong*macTime;

macSmooth2 := macSmooth*macTime;

EMA2 := EMA*MacTime;

mac := ma(C,macShort2,E) - ma(C,macLong2,E);

macSig := ma(mac,macSmooth2,E);

macplot:= (mac-macSig);

impulse2 := if(macplot >= hist(macplot, macTime), 1,0) + if(C > ma(C,EMA2,E),1,0)-1;

[color=Blue; name=Zone 1]

impulse2>0;

[color=Red; name=Zone 2]

impulse2<0;

[color=Black; name=Zone 3]

true;

{Come Into My Trading Room page 157-162}

[color=lawn green; linestyle=solid]

ma(C,EMA,E);

{ Plot a dot where price would have to move in order to change bar colour, Max}

dota:=roc(ma(C,EMA,E),1,%) * (0.0049*EMA) * Close;

dotd:=roc(ma(C,EMA,E),1,%) * (0.0047*EMA) * Close;

[linestyle=points; color=dodger blue]

if(dota < 0 ,C-dota,undefined);

[linestyle=points; color=coral]

if(dotd > 0 ,C-dotd,undefined);



Edited by maximo - 16 May 2010 at 8:23pm
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