This is a forex trading strategy that is designed around the parabolic SAR indicator.
If you don’t know how the parabolic SAR indicator works, then here is a brief explantion:[sociallocker]
- in a downtrend market, the parabolic SAR will form above candlesticks so you can take this as a signal that the uptrend market has ended
- similarly, but opposite when in an uptrend market, the parabolic SAR will from below candlesticks,
One feature of the parabolic SAR indicator is that it makes it clear for you to identify market swing points of the past.
Timeframes: 1hr, 4hr and daily
Currency Pairs: Any
Forex Indicators: Only Parabolic SAR Indicator required here.
TRADING RULES FOR PARABOLIC SAR FOREX TRADING STRATEGY
Refer to this forex chart below for how to buy and sell using the parabolic sar indicator.
- Wait for an uptrend signal: parabolic SAR dot forms below a candlestick.
- Next thing you do is to place a buy stop pending order 3-5 pips above the high of that candlestick that the parabolic SAR formed under.
- Then place your stop loss at least 3-5 pips below the low of that candlestick.
- Exit your trade when the Parabolic SAR indicator generates a sell signal ( when a Parabolic SAR dot forms above a candlestick).
The rules for selling are complete opposite to the buying rules, here they are:
- wait for a downtrend signal…you will see a parabolic SAR dot form above a candlestick.
- When that happens, place you sell stop order at least 3-5 p pips below the low of that candlestick.
- Then also place your stop loss at least 3-5 pips above the high of that candlestick.
- Exit your trade when the parabolic SAR indicator gives a buy signal (when a parabolic SAR dot forms below a candlestick)
DISADVANTAGES OF THE PARABOLIC SAR INDICATOR FOREX STRATEGY
- it is a lagging forex indicator just like moving averages, therefore it responds late to price movements.
- because the parabolic SAR indicator responds late, your stop loss placements are not in ideal locations like behind support and resistance levels..and if you were to place them there, the stop loss distance will be generally huge.
- a flat market or ranging market will really create a lot of false signals.
ADVANTAGES OF THE PARABOLIC SAR INDICATOR FOREX STRATEGY
- for begineer forex traders, this is a simple forex trading strategy you can use easily, its not complicated at all.
- in a good trending market, the parabolic sar will generate buy and sell signals that will work very well and can potentially make your a lot of profitable pips.
So there you have it, this is a simple forex trading strategy that uses the parabolic sar indicator at its very basic form. Don’t forget to click those buttons below to share, like, tweet etc…would mean the world to me if you do. Thanks [/sociallocker]