Parabolic SAR

[alessandro0003msc]

Hi
is there anyone know how this indicator work?

Indicator Based Forex Systems

[Chavtrader]

Hi, although I certainly wouldn't call myself an expert trader, I do use the Par SAR in my trading.

You simply click on the indicator.
Select what colours you want for UP and DOWN.
The SAR simply follows/trails the trend by lying underneath/above an up or down movement.
Try and get in at the first change in the dot colour, ride the trend until the first change of the dot colour to the opposite direction.

The SAR I have found however, is best used as an indicater that tells you when to get out of a trade. It also is not much good during whipsaws.
If you trust the RSI then you should trust the Par SAR, seeing as they were invented by the same guy.


All in all, the SAR is one of the best indicators I have seen. My personal trading plan (if you're interested) is as follows:
(i) Set a 55 WMA (weighted Moving Average) on the HIGH (coloured Black).
(ii) Set a 55 WMA on the LOW (coloured Black).
(iii) Set a 10 DEMA (Double Exponential Moving Average, although you could just as easily use a 10WMA if you liked) on the CLOSE (coloured Yellow).
(iv) Set the Par SAR.

GOING LONG:
ENTRY = When the rising 10 DEMA cuts the top of the 55WMA = Buy.
EXIT = When the first Par SAR changes colour = sell to close and exit trade.

GOING SHORT:
ENTRY = When the falling 10 DEMA cuts the bottom of the 55WMA = Sell.
EXIT = When the first Par SAR changes colour = buy to close and exit the trade.

The reason there is a 55WMA on the HIGH and the LOW, is to act as a channel in order to try and minimise the number of false whipsaw signals. Whilst the 10 DEMA is in this channel, no trades are taken. It is only when the 55WMA is broken, either up or down, is the trade taken.

Stop losses should be placed at the opposite side of the 55WMA (the lower one if going long, or the upper one if going short).
The strategy thus has a definite entry and exit point, it is known exactly where to place STOPS, and a definite profit taking point is known.
The strategy can be used on any time frame, but seems to work best on currencies (because they move in a less jerky fashion than stocks or indices), and for some reason the 1hr time frame (god knows why) seems to work best.

By knowing exactly where stops are placed (and they can be moved up/down to lock in profits if you want as the trade moves your way), it is known exactly how much you will potentially lose on any one trade, thus allowing you to calculate your 5% (or whatever percentage you use) max loss of your capital that you allow yourself to lose.


The drawbacks for me in trading, is myself. I can't stop fiddling with indicators and trading systems, but this is the only one where I've won money with. I called it the CHAVTRADER system, ha ha.
Use it all you like, and if you do please let me know how you get on.
May the Forex be with you,
Chav.

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[Jonas]

I am mostly dissapointed with the Parabolic SAR indicator, but I have only used it for stocks....

It's slow, easy to fall in "wrong" cycles"...

Indicator Based Forex Systems

[Chavtrader]

Hi. Sorry to hear you're not having much luck with the Par SAR. In my opinion, the reason why people go wrong with this indicator (assuming they are trading with a "Golden/Dead Cross" two MA crossover system) is because they do not wait for the slower moving average to be already above the longer MA before getting in at the first 'green dot' (assuming as an example that you are Going Long).
They wait for the first 'green dot' and take the Long trade, even though the slower MA is presently below the longer MA. This is what I call an "unstable trade", and will most probably result in the price whipsawing against them. What they should do (that I have seen from experience) is wait until the first green dot appears IF the slower MA is already above the longer MA (or the two MAs actually crossing will also suffice). This is similar to waiting for a pullback.
The situation is simply just reversed if Going Short.

The Par SAR is ideal (in my opinion) for getting out of a ranging trade, and I have fiddled around with it to try and see exactly why it does not appear to be too good for getting in to a trade. The answer, in my opinion, is what I have written above. Waiting for the MAs to firstly be in sync, and then waiting for the first green/red dot, greatly minimises the whipsaws of which you (and hordes of other newbie traders) complain of.



Have another go.
Good luck,
Chav

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[myfx]

Hi,

How are you doing with the method you mentioned?

Is it earning you pips since then?

[tapasp25]

sorry but isn't it a lagging indicator for day traders.....? for the most volatile conditions ....it'll fail...cause I like storms when I m to go surfing n a caravel is not a good choice.

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