Trading the New Impulse MACD 100 Times: Is It Better Than the Classic?

[00:00] the macd indicator was invented in the 1970s yet so why are we still using it right now because believe it or not there are actually newer types of macd

[00:14] indicator that were created this century like the zero lac macd and the impulse macd so are they really better than the classic macd let's find out because in this video i'm

[00:28] going to be testing two new types of macd indicator 100 times so that we actually know are they really better than a normal macd so without further ado let's get straight into the back test

[00:42] so the first type of macd indicator that i'm going to be back testing is called the zero lag macd so we all know that the classic macd is famous for being a lagging indicator because the macd is based on an

[00:55] exponential moving average which is inherently a lagging indicator so the theory behind the zero lag macd is that it is based on moving averages that does not lag so it removes the lag from the classic

[01:09] signals [Music] so if you type 0 lac macd on trading view you'll get a couple of results i prefer using this one enhanced version 1.2

[01:23] so here you can see that it's a bit different from a classic macd read so i'm actually going to change the colors to make it easier to read and i'll also disable this ema on macd

[01:39] in the back test so the way we read this indicator is almost like a normal macd so you take a long position when the blue line the macd line crosses upwards through the orange signal line

[01:54] and you take a short position when the blue macd line crosses downwards below the signal line but in this indicator it does not matter or below the baseline the lines can be in any position

[02:08] as long as it crosses over we also have these dots that will help us determine these dots that will help us determine when a line crosses over so if this green dot appears it means the macd line is crossing

[02:21] upwards and we take a long position and if this purple dot appears it means the macd line is crossing downwards and we take a short position so you can see the difference between a normal macd and a zero lag macd

[02:36] the zerolack macd gives a much earlier entry signal than the classic macd if you would have used the classic macd you would pretty much miss the trend already because of a late entry

[02:50] this indicator if a green dot appears it means i'm closing my previous short position and opening a new long position

[03:02] and if a purple dot appears it means i'm closing my previous long position and opening a new short position however i will set my max loss to only 15 pips which means if a trait reaches -15 pips

[03:17] i will close the trade automatically and wait for a new signal to appear wait for a new signal to appear so our loss will never exceed 15 pips so now that you know the rules let's get on with the back test

[03:30] thousand dollars using 200 times leverage per trade i'm only risking two percent of my capital and i'm also testing the usd cad

[03:42] 30 minute chart so without further ado let's get on with the back test so here's a time lapse of me backtesting the strategy you can skip to the the strategy you can skip to the timestamp shown in the screen to see the

[03:58] [Music] results

[04:17] 100 times we received a win rate of 40 which is a little below average despite that that we received a net profit of 27

[04:29] only took us 7 days even with the 30 minute chart it only took me 7 days to reach 100 trades which is really really fast most indicators takes up to three months to over a year to reach 100 trades

[04:45] which means two percent in seven days isn't bad but despite making 27 dollars profit our largest single trade win was 30 so one of our trades made more money than the total profit itself

[05:01] and our largest single trade loss was only six dollars that means that without this one trade we would not be profitable in the first place so we actually got extremely lucky

[05:14] and you may be wondering how does a zero lag macd which is supposed to give early ended up giving worse results than a normal macd which has a late signal normal macd which has a late signal well let me explain so if you compare

[05:28] the zero lag macd with a normal macd notice that the zero lag macd gave an early entry signal amazingly right at the start of the trend compared to the normal macd

[05:41] after however because the zero lag macd is so it often backfires like this trade notice that it gave much earlier entry signal than a normal macd however

[05:55] it also gave an early exit signal because the indicator is so sensitive compare that to the normal macd which gave a much better exit signal because it let the trend mature that is also the main reason on why we

[06:09] got so little profits because we always exited too early and the indicator also gives so many false signals those false signals leaving us with only small losses but it

[06:24] so much false signals that those small losses slowly accumulates two bigger losses that is also the reason on why it took only 7 days to reach 100 trades because the indicator is so sensitive so

[06:38] you take more trades so overall i don't really recommend this so overall i don't really recommend this indicator that we are going to backtest is the impulse macd

[06:55] on trading view i'm using this one impulse macd by lazy bear i'm also changing the colors of the indicator to make it easier to read so the theory behind the impulse macd is that it filters out noises

[07:09] better than a normal macd so you can see when the impulse macd detects noise in the market it becomes completely flat like this compared to the normal macd which will instead reacts to these noises

[07:25] macd that removes noises in the price so my signals for this macd is exactly the same as the normal macd if the blue line crosses upwards you take a long position and if it

[07:41] i close my previous long position and take a new short position count as a crossover if the lines remain the same for example

[07:53] you can see here the blue line crosses upwards and a flat signal appears but as you can see when the flat signal ends it is still above the signal line

[08:05] it means this is one continuous trade and you don't close any position here however there are times where it's in the opposite instead downwards meaning you take a short position

[08:19] position and a flat signal appears but notice when the flat signal ended the blue line actually became on top it means this counts as a crossover so i'll close my previous short position

[08:32] and enter a new long position at the end of the flat line of the flat line and i'll also set my max loss to 13 pips so if a trade reaches minus 13 pips i close my trade automatically

[08:46] so i'll also use the same settings i'll start with a capital of one thousand with 200 times leverage per trade however each trade i'm only risking two percent of my capital and i'm testing the usd cad 30

[08:59] so here's a time lapse of me back testing the strategy you can skip to the time stamp shown in the screen to see the results

[09:30] 100 times we received a win rate of 28 percent and we lost 24 using this indicator and worst of all our largest single trade win was actually 44 dollars but our largest loss was only 5 dollars

[09:47] so despite having a very small largest loss all-time high was only one thousand twenty one dollars which means when back testing we never broke past twenty one dollars

[10:00] the strategy took three months to reach so even though the concept of it filtering out noise sounds instead it gives a very late entry and exit

[10:14] signal in fact it gave a much later signal than like you see in this trade when the impulse macd gave a short signal the trend pretty much already ended compared to the normal macd

[10:28] which still gave a late signal but it's not as bad as the impulse macd and i do not recommend you using it i think the lesson that we can learn

[10:41] from this video is that new things doesn't equals better sometimes it's better to stick with the original stuff so i just gave you two new indicators that you can just fully avoid and you do not have to waste

[10:53] your time and money testing it yourself and all i ask for in return is like the video and subscribe to the channel it literally only takes two clicks and it means a lot to me you can also check out my other videos

[11:05] as well so thank you guys for watching and i'll see you in the next video