Parabolic SAR - that's all!

[dpaterso]

Good Evening All!

ottober8:

Welcome to the thread - and keep us posted on your progress - and feel free to ask any questions or provide input.

willsucceed:

Hello again.

I am taking the time to learn the mental discipline of trading

If you can do that - I believe that you are 99% on your way to a fortune.

jacioux:

Thanks for the message and please do post when you have time.

As for the current 'state of affairs' folks:

OK - look - as far as this thread goes - should we continue with 'pure' Parabolic SAR - or should we try and build a 'system' with Parabolic SAR as its core? It's up to you guys.

I mean - without 'doggedly' sticking to Parabolic SAR - like with the stop losses and stuff like that - maybe we can indeed 'optimize' a Parabolic SAR 'system' for ourselves. Not sure.

I've spent most of the afternoon looking at all the pairs - and - based on Parabolic SAR - there was no problem with the positions that I had open (which like and idiot I closed but that's behind us now). If I add another indicator like ADX for example then I would have to say that based on this other indicator (ADX) I should not have been in at least 50% of those same trades and the same with MACD. Then you have to ask yourself - why use Parabolic SAR with MACD? Parabolic SAR gives a signal before MACD so if you're waiting for MACD to cross - then you're actually just trading MACD not so?

Anyway - right now - my money is on 'pure' Parabolic SAR - but I really don't mind if someone comes up with a plan that uses Parabolic SAR as an entry point but then devises an exit strategy that 'chops off' the inevitable Parabolic SAR reversal that has to come before getting a stop and reverse signal.

There is one thing that I have been noticing for the past couple of weeks - and I don't know if this is a 'hard and fast' rule or if there is even a real reason for this happening but I have noticed (I think I've already mentioned this part) that Sunday / Monday are always quite and inevitably result in sitting with loss positions until Wednesday. Then - on Wednesday - things start to change - and every single time I've made profits (especially these 'inflated' profits in the past two or three weeks) it's been on Thursday / Friday. Mean anything? Not sure.

Another thing that I have noticed (and I believe that this is common knowledge in the business according to the reading and research that I've done) - no matter what the trend has been during the day - it almost always starts reversing (temporarily) at around 15h30 NY time and carries on until market close. So - the reason I'm mentioning this is as follows: today the Indices, stocks, Gold, etc. etc. all reversed their misfortunes of yesterday and climbed but - I suspect that a minor reversal will be coming at these times - and - this - combined with yesterdays 'disaster' - will put me in the position where on most of the pairs that I took profit on last night or closed at a loss - the price is far better than it was on my original Parabolic SAR entry point i.e. in my favour (late entry as described in a previous thread). So - my 'modus operandi' is going to be to halve my lot size for now - and re-open all of those positions IF the price is the same or better than it was when I originally opened the position in the first place.

I don't know if there is any point continuing with the Parabolic SAR 'reports' that I started posting on a daily basis as I have now 'messed' the picture up and would have to go through a whole lot of back 'checking' to see where I left off, what positions I now have open, and why etc. etc. etc. Let's put it this way: once THIS Parabolic SAR 'cycle' has completed (and by that I mean as soon as I am in a net profit situation again which I'll wager will be by tomorow or Friday night) I will close all of my positions - take profit - and then start posting the reports again (if necessary).

You know - the funniest thing is - that I have gone against every single thing that I have been preaching in this thread since it started. I reckon - if I could stick to my OWN advice - I'd would be doing far better yesterday and today than I am. I mean - what do I keep saying to everyone? Don't mess with the indicator - don't second guess it - don't allow emotion to come into play - trust the indicator - trade mechanically - blah, blah, blah - and yet - somehow - I managed to go against everything I've preached last night - and - like I said earlier - once again - Parabolic SAR was right - I was wrong.

Regards,

Dale.

P.S. Start posting some exit strategies here - let's see. I have a few ideas of my own which I will post later tonight (today) or tomorrow. The only problem that I have with this is that I KNOW that Parabolic SAR takes ALL of this into account in its calculation. That's why sometimes you will find that the entry point is miles away from the current price and other times you'll find that the entry point is a 'hairs breath' away from the entry point. All I'm saying is that because Parabolic SAR has turned consistent (although smaller) profits for me every time I've used it I'm 'scared' to mess with it BUT - as anybody will tell you - probably even J. Welles Wilder himself - the times have changed and the markets have changed over the years - so - MAYBE (and I do say MAYBE) there is some tweaking to be done that will enhance the Parabolic SAR 'system'.

[jacioux]

Ok, I hope this makes sense and helps out a little.

The attached chat is of USD/CHF and yes I am aware that there are up to 44 pairs being traded but I have noticed this applies to most the other pairs. Now for the chart break down. This is still following the system place, daily and PSAR only.

Now for my main point on all this, when a new dot or signal is shown set you entry 4 pips above the high of the current bar on a buy signal and 4 below on a sell signal and wait, if you notice on the false signals (labeled on the chart) the entry would not have taken place and you have a new signal to work with the following day. I did adjust the PSAR setting to tighten them up and still use the stop loss that the plan is currently using. The settings I now have are AFinc .205 and AFmax .180 –

The entire idea of this is to keep you out of poor trades BUT lets you take profits on big moves while keeping your losses small, I feel that Dale is onto something here and like most systems you need to fine tune them.

Hope this helps maybe a little.

[jacioux]

Also maybe you can change the settings on the SAR and see what that does, a pure SAR system is an achievable goal. I use something similar to it and make about 70 pips a week with it and I am still changing it to dial in the highest percentage by day of week and time of day to trade. Right now we have a great entry, just need to know when not to get to greedy and take some profits.

[alexc]

Greed plays a factor in how much you win in with this system. If you look at your account one night and see that it is showing a 30K profit you'll be sitting chuffed to pieces. Your brain is telling you that if you leave it until the PSAR stops and reverses you'll be even richer. So you leave it.

Next day you see those open positions now are a 30K loss !! You panic like hells loose. You think you should close them... and you do. Then you feel quite empty, blaming your greed for you downfall... BUT YOU'RE WRONG. There would then be a correction, and those positions you would of had are gone.

PSAR is nearly always right.. remember that!

Anyway I had a good day today. I am based in the UK so I mostly deal with the GBP/??? markets. This morning I arranged 6 positions and got bought/sold lots depending on what PSAR says. GBP against USD,CHF,AUD,NZD,JPY and EUR.
I put a stop loss on everything and put up £10K of £100K on each lot as margin.The 2 against the AUD and the NZD were stopped out and I lost £7.5K between those two. But now I have a position against the yen thats £22K in profit!!! A position on the dollar worth £8K in profit, swiss franc nearly £6K in profit, and the euro which is £1.5K in profit.

So my £100K balance is now worth £130K in one day!!

Alex!

[dpaterso]

Hey Alex,

Man - I really appreciate your post. You might as well have 'tapped in' to very own emotions and thoughts and then just put them down on paper.

It's like I said earlier - it's the strangest business - when you've made money - you're not happy because in most cases it should have been / could have been more - and of course you're not happy when you've lost money.

I thought that by using Parabolic SAR exclusively it would temper my emotions and 'force' me to see trades through no matter what - but it would appear that I'm still a long way away from keeping my emotions out of my trading.

As it stands right now my small losses of last night are just about covered - probably will be in the next hour or two - and then the few positions that I have left will most likely turn to a semi-decent profit if all goes well. But still - now I'm even more pissed at myself because had I not overreacted last night - like I've said not to do throughout this thread - then the profit would have been bigger. See my point! I mean - it's the weirdest thing: now I'm sitting here hoping that things go 'pear shaped' again - just like they did last night - so that I can reopen those positions at sort of 'bargain prices' and then let them run again and turn another HUGE 'inflated' profit. It's actually disgusting! Do you think there is some type of 'support group' for people with this condition? (That's a joke by the way - just in case I'm creating the impression that I've finally 'lost the plot' - then again - I do believe that this business could be the death of me). Actually - do you think there is a name for this condition? That would be a good study: statistically speaking I would love to know if there is any marked difference between the life expectancy of a group of traders and the general population!

Anyway - moving on:

To be honest - I'm not even sure if I want to reopen the positions again that I closed last night - even if some of them are at a better price i.e. wait until I've covered the losses from last night - make sure that I'm at least a bit up for the week - and then close the positions - and step back until next week. For once - I'd like to have everything nicely sewn up at market close on Friday night - I'm one of those people who can't take my mind off my positions until they are closed - it sort of 'nags' at me every weekend.

Actually - that's probably the way for me to play this round out. I been caught more than once on the last day of the month because of contract expiries and renewals and rollovers on the last day of the month etc. etc. etc.

A bit of hope: historically - the month of August - has always been the worst month for the Dow, S&P, and Nasdaq. So - if this has been a bad month - then I cannot wait for next month. I should not be complaining or ANYTHING like that. After all said and done - I've had a great month. If I look back - I'll tell you that thanks to Parabolic SAR - it's probably been the best month I've had since deciding that this is what I now want to do for a living. I'm probably up a couple of K for the month overall - I've been able to cash in a couple of K this month - and I have a nice bit of margin in my accounts for next month - more than I had last month - that's the key. Yes. The more I think about this - let me take another small profit when it comes tomorrow or on Friday - and start again fresh on Sunday night.

I have just got to say at this point: thanks to everyone who has contributed to this thread and shown some interest and read my pages and pages and pages of 'inane drivel' at times (I've been told that I write well but I have a tendency to 'waffle on' as well. I just like to try and explain things very clearly because I know that I cannot stand having to try and read instrucions for something where the writer just 'assumes' that you know what he is talking about)!

Anyway - I might have a little 'surprise' for all of you good people that are interested in the work of J. Welles Wilder Jnr. and would really like to get the low down on his systems like The Parabolic System (guess what that's based on), The Volatility System, The Directional Movement System, The Trend Balance Point System, The Reaction Trend System, The Swing Index System, and his Commodity Selection Index. I'll bet all that's got you going? Just keep watching this space - I'm just waiting for one or two little things of a technical nature to be sorted out - and all will be revealed!

Oh - by the way - I'm just had a quick glance at my open forex positions - looks like I might just get my wish for things to go 'pear shaped' after all - but - I'm still happy!!!

Edit:

OK - well - couldn't help myself - and reopened / renewed all of my positions that I closed yesterday - with the proviso that the price had to be equal to or better to the original price at which I orginally opened the position earlier during the week. You all knew I'd do this didn't you - it was just a matter of time! Anyway - the theory being that had I not closed out those positions yesterday - by opening them again at the same or better price - it's like nothing ever happened (except of course for the ones that NOW would be sitting in a profit situation). Now I don't have as many pairs / positions open but the upside is that I should have no margin problems now.

Regards,

Dale.

[dpaterso]

Good Morning, good morning, good morning!

Nice day today? It's Thursday you know!!!

Why no posts? What gives you people the right to sleep!!!

Regards,

Dale.

[droesparky]

Hey Dale it looks like they all bugged out on you today.

Not only do you need exit rules, you also need some kind of re entry rules for when you get shook out of a trade early, It will always happen so there always needs to be a rule for it. either that or no entry until next signal.

Maybe something like if its a down trend re enter on the break of the low of the last days candle. otherwise your looking for a new signal.

I have been running thru indicators to try find a good exit indicator, I think every one in forex would like that one.

Best I can come up with is trendlines. Once there broken get out. It is still not perfect and shows you why you need some type of re entry rules.
I used fib channels instead of trendlines on the chart. See what you think?

[qsig]

dale,

Fabulous read thus far. For all the demo traders out there, that blow past the money management / emotions section and skip right to the "meat of the course for the cool ma cross, zig zag aroon,etc etc guru system on the 15 min time frame" please reread dale's thread from the beginning and experience the opportunity that he has given you on a real world scenario how emotions can and will have a huge impact on your trading.

imho, having a huge winner turn into a loser before your eyes is crippling to your esteem and rem sleep (lol). He broke the cardinal rule of move stop to b/e once you are in "sufficient" profit. (i think we can all relate to that one)....
a few too many times for me (doh)!!

I can't help but chuckle at the questions of the "i see it works on the dailys, do you think it will work on the hour ? 15 min ? 5 min??"

Did your broker send you a thank you note and a free spread your next trade? You are putting more dinero in their pockets. Thats why they despise longer term traders. They make all the profits (remember the 5% winners mantra everywhere ??) and brokers get squat.

whew... ok done...

now the psar chat.

Once again thank you dale for the great thread on this topic.

Jacioux, i think your suggestions got great potential, to stop the dud entries.

my take on a possible exit (or at least tighten stops/trails) is use simple boll bands. As the trend is losing gas (or retrace process begins), you will notice the higher high (long trade) candle(s) start closing INSIDE the band, as opposed to riding along the band. I have noticed this is the first hint of a retrace. Back test this and you will get what i'm referring too.

nick

[dpaterso]

Hello,

Man - there are some nice posts coming through now.

qsig:

I love your take on this - ROFLOL!!!

Also - Bollinger Bands - never thought about that - have used them in the past with mixed success - BUT - that was for entries and exits and everything. Here - you are already in the trade thanks to Parabolic SAR - and all you're looking for is an impending sign of a reversal - Bollinger Bands - good stuff.

droesparky:

I like the idea of the trend lines I must say. I never use fibo levels because I never know where to stop and start - too much margin for 'interpretation' for me - I'm always wrong. Trying to trade using fibo levels and pivot points has nearly always ended up in disaster for me. But - I suppose - it's a skill like anything else not so?

jacioux:

Sorry man - I only noticed your posts now - I don't know why I missed the detail in them. Your idea I think has merit as well - it's pretty much (I think) like what I was saying in an earlier post i.e. your are basically 'shadowing' Parabolic SAR so that you only get into valid trades (if I'm understanding you correctly). Nothing wrong with this idea - although I've never actually tried it.

Look - there is nothing wrong with taking profit - and then waiting for a re-entry point (I've referred to them as late entries but then I was referring specifically to entering a trade if you had already missed the Parabolic SAR entry point). Now - you've got me thinking - why not enter the trade 'normally' i.e. on the first dot - and - if you get to a certain predetermined profit percentage or amount (always a problem to define for me) then take profit and wait for a re-entry point (again what I call a late entry point). The probem with the above is that I just cannot help myself and enough is never enough. Like I said before - I have screamed 'man I should not have exited when I did' many more times than I have said to myself 'man am I glad I got out when I did'.

I've even thought of using some of the info from one or two of the books that I have bought and read i.e. the general consensus seems to be that the market very rarely gives you more than three to five bars in the same direction i.e. take profit on your third bar, wait for the retractment, enter again, take profit on your third bar again, and so on and so forth. The three to five bar rule seems to be a sort of 'standard' with most trading 'systems' i.e you'll find that in a lot of the 'systems' they always start trailing a stop after the third bar. I suppose the logic is that the profit you make on the first three bars in any given direction has been earned - anything over and above that is pure luck! Not sure. Just an observation.

I also want to have a serious look at those 'Chandalier Stops' (mainly because I like the name) and I had a glance over some of the websites and it (they) look interesting but I need to mess around with them for while.

Keep it coming!!!

Edit:

You do all know that there is a 100% guaranteed way of making money in the market with 0% risk. Basically - the system works as follows: you listen to - or read - everything that I say or write or post - and then you do EXACTLY the opposite of what I'm doing!!! Guaranteed profits!!! The NYSE is about to open - and it's Thursday - and we all know that things go my way on a Thursday - right??? So why the f**k is the Dow (and my forex profits) going down THIS Thursday. I know why - it's because I said that everything would go up!!! Get my point???

And yet another edit:

I must tell you - that everyday - I hear the NYSE starting bell - and - have you ever noticed - that it sounds no different from that of the bell that they use at boxing matches or horse races!!! Do you think this means anything??? Do you think there is anything to be read into this???

Regards,

Dale.

[droesparky]

Ha yes that bell says come out of your corners with your dukes up!

I dont trade off of the fibo channels I just use it as a trendline. Its sexier then a plain ole trendline. I think you can see from the trend side of the channel a break on a daily chart is usually a fairly safe exit.

I was looking at a chart of the cad and its big drop and wondering what nerve it takes to set there day after day and hold it when your up 3or 4 hundred pips. any way the early trendline held all the way for over 1000 pips.