【The Trading Edition】 Episode 18: Do Not Miss the Market's "Brake Lights"! The Pro's Most Powerful Censor, 'Impulse System' ??

In the previous article, I talked about the importance of combining scattered indicators into a “trading system,” and the iron rule to always write down three numbers—entry, take profit, and stop loss—on paper before trading.

This time, I will thoroughly explain the strongest “censor” Dr. Elder developed, the “Impulse System.”

This system does not give pinpoint signals like “Buy here!” It’s not that; rather,it is a life-line-like system that prevents fatal mistakes such as “Do not buy now” and “Do not short now” before they happen..

? Color the chart with three colors

The Impulse System combines two powerful indicators to visually convey the market’s momentum with colors.

The two indicators used are the following.

1. Exponential Moving Average (EMA):Shows the direction of the trend (e.g., 13-day EMA).

2. MACD Histogram:Shows the momentum of the trend.

In the doctor’s system, the slope of these two indicators (whether it is rising or falling compared to the previous day) is combined to automatically color the chart’s bars (candlesticks) in three colors.

• ? Green (Bullish):EMA rising + MACD histogram rising

  • The trend is up, and momentum is up.

• ? Red (Bearish):EMA falling + MACD histogram falling

  • The trend is down, and momentum is down.

• ? Blue (Neutral):When the two indicators point in opposite directions (e.g., EMA rising but MACD histogram falling)

  • A state where bulls and bears are in balance.

With recent charting software (such as TradingView), you can easily set the colors of the candlesticks to change automatically under these conditions.

? The absolutely non-contradictable warnings of “Red” and “Green”

The rules these three colors teach are extremely simple yet powerful.

[Iron Rule of the Impulse System]

1. When the bar is green, never short!

2. When the bar is red, never go long!

The Impulse System is a “trading censor.” It doesn’t tell you when to buy, but it warns you, “Your plan is completely counter to the current market momentum, so cancel that order now!”

For example, suppose you were aiming to buy as a counter-trend move, thinking the bottom is near. But if the chart’s bars are dyed bright red, it’s like a dump truck speeding straight toward you while you stand in the road. Until the bars change at least to “Blue (Neutral),” you must not press the Buy button.

?‍♂️ Exit when the red light comes on!

The Impulse System not only restricts entries but also exerts the strongest power in the timing of exits (taking profits or stopping losses).“Exit timing”.

The doctor uses this system in short-term trading as follows.