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Forex trading strategy using the Parabolic indicator

 

 

In this article we’ll talk about an interesting and profitable Forex trading system with the Parabolic indicator. This Parabolic Sar strategy belongs to a number of trend strategies and is used on any time periods (timeframes), but the optimal, in my opinion, is the hourly H1.

 

So, the Parabolic Sar strategy uses two forex indicators:

  1. Parabolic indicator with standard parameters (step: 0.05, maximum: 0.2), in the MetaTrader trading terminal: "Insert" / "Indicators" / "Trend" / "Parabolic Sar".
  2. 3 exponential moving averages (EMA) with periods of 10, 25 and 50, respectively.

 

Signals to enter a trade according to the Parabolic Sar strategy

When the moving average (10) crosses the EMA 25 and 50 upwards, but the Parabolic Sar indicator is below the price, this indicates a buy signal at the close of the candle, that is, a Buy order.

If the EMA 10 crosses the moving averages 25 and 50 from top to bottom, and the Parabolic is located above the price, this is a signal to sell at the close of the candle (Sell order).

Exit from a position according to this system occurs when the price on the chart crosses all three moving averages in the opposite direction from an open position (for buying - if from top to bottom, for selling - if from bottom to top).

 

The Parabolic Sar strategy does not provide for placing a take profit order, which means that it requires a frequent presence of the trader in the market to control the current

situation in order to make a decision (close a position, move a protective stop or open another deal). In this case, stop

loss must be set at the level of 10-15 points from the exponential moving average with a period of 25.

In addition, you can also place a stop loss order at the nearest local extremes (highs or lows of the price).

 

When the price level moves in a direction that is profitable for the trader, I recommend using the manual trailing stop technique , that is, when the price passes approximately 40-60 points from the opening of the deal, the stop loss is moved to breakeven (to the position opening level), after that we gradually drag it along the level moving average 50 towards the price movement. Using this tactic will help you reduce the risk of potential losses to zero and lock in the profit on the trade.

Since the Parabolic Sar strategy is trending, it works effectively on volatile currency pairs such as EUR / USD, USD / CHF, GBP / USD and others.

 

 

 

 

Published on: 9/17/20, 3:30 AM