Parabolic SAR - that's all!

[dpaterso]

Hello again.

OK - well - this is not the post I was talking about - but I'll just reply to you quickly on this.

I don't know what broker you are (were) with but it sounds like the lot sizes cost too much for the capital that you were starting with (I say this because one lot of one pair managed to margin call your account). One of my (forex only) accounts is with a broker called Delta Stock. Your lot size can start from 1000 units and you can work on a 200:1 leverage. Just to give you an idea you could have opened 1 lot of GBP/JPY of 1000 units last Thursday and this would have used $10.12 of your margin. This single position would now be showing a profit of $49.74 (as I type this message) just by using Parabolic SAR (I'm just taking my positions and dividing them by 10 to give you a comparison because I have set my minimum lot size to 10 000 - which you can do yourself by the way at this broker). I currently have 26 lots / 26 pairs open - all based on Parabolic SAR entry since last Thursday (3 I opened this morning though) - and they are currently showing a profit of $3947.70 (in your case this would be $394.77) but think about it - in no time you could build your account to the point where you could increase your lot size.

It depends on your broker I think. 1 lot at my 'main' broker costs $50 regardless and 1 lot at my other broker costs a mininum of $100 for 0.1 of a lot. Can you see the difference? It's a lot easier to get margin called at the other two brokers (trust me - I speaking from experience). Anyway - Delta is going live next month (so I'm told) with CFD's, Indices, and Commodities - so I'll be moving my 'main' account to them.

Hope this helps.

Oh - by the way - I'm talking about Daily and longer.

Regards,

Dale.

[ccox]

Dale,

Say you have went short on a USD/CHF position when it pierced the parabolic dot on the 4 hour chart. And then at a later point, the currency pair kept heading south and pierced the parabolic dot on the daily chart as well. At what point might it be a good idea, or acceptable to add to your position, and short some additional lots?

Thanks for your help!

[gagan]

Dale,

I am with FXCM and i have a mini account...but i guess with $500 deposit and if i just trade one currency pair i think it should be alright as according to the 5% rule i can put a stop loss of 25 pips.

What do you think?

Thanks for your help

Regards

Gagan

[dpaterso]

Good question - and I've been wondering about that.

Put it this way - I reckon - if you have enough margin - then why not add if the price pierces PSAR on the next timeframe up? If the truth be told that is exactly what I did this morning on AUD/USD (I hope I'm not going to regret this but my explanation is coming shortly). I closed my position of Friday ('gutless') but when I saw that the weekly had pierced PSAR this morning and the first PSAR dot had already appeared on the top I reopened the position. Now if I was not so 'gutless' I would still have had my Daily AUD/USD position open from Friday and I would have opened another position based on the Weekly this morning and had two positions open. Just remember to move the right stops i.e. move the Daily stops on daily and the Weekly stops weekly if you know what I mean.

Regards,

Dale.

[dpaterso]

Sorry - the previous post was with regard to adding to positions.

gengan:

Just remember this: if you are going to start using Parabolic SAR then Parabolic SAR actually tells you where to put your stops. In other words - depending on the trade - your stop loss according to Parabolic SAR MAY be much more than 25 PIPs so you need to make sure that you have enough margin to get stopped and then still stop and reverse etc. etc. The only reason that this appears to be working is because I am not 'mixing' one theory with another or one rule with another. Take a look at some historical data using Parabolic SAR and you will find that often the price has retraced far beyond your opening price BUT because you were using Parabolic SAR to set your stop loss the price has changed direction and put you in a profit situation. Had you set a fixed stop loss on that type of trade you probably would have been stopped out prematurely.

Regards,

Dale.

[dpaterso]

Oh - and remember - it's not enough to just set stop losses. In order for this indicator to do its job you have to stop and reverse not just stop!

Regards,

Dale.

[dpaterso]

Ok - well - I thought I'd keep this thread going - so that we can see where we are at with this indicator (and if the truth be told - it keeps me away from my trading platforms and also serves to keep me in check)!!!

Here are just some thoughts and observations.

First: I reopened my short position that I closed on Friday. Why? Mainly because I'm giving all of this advice about sticking the trades through and letting them run their course based on Parabolic SAR and then I'm doing the total opposite - not fair - not good!!! Also - I had a look at the Weekly chart for AUD/USD and this morning the very first PSAR dot appeared on the top of the new Weekly bar so - in keeping with my experiment and my own advice - if I was trading the Weekly charts - I would have entered a new short position here anyway. I hope I'm not going to regret this!!!

Second: I can see why people (myself included) give up on this indicator very quickly and easily. The main reason I think is because when you open your very first position using this indicator you may have already missed a major move AND you therefore would have made an immediate initial loss. The trick, as far as I am concerned, is to take this (possible) initial loss and remember to stop and reverse. Once you have got to your first stop and reverse then you should be good to go for the long haul.

Third: I have on two occasions this morning attempted to 'second guess' the indicator. Take a look at the attached Daily for GBP/BGN (that's the Bulgarian Lev if you're wondering). I'm taking a chance by second guessing the indicator (this is not a good thing especially with AO) BUT I'm thinking (hoping) that because PSAR has been penetrated already that tomorrow's first PSAR dot will appear above the new bar and I will be in the trade early. If not - I've set a small stop loss i.e. just above the high of the current bar just in case I'm wrong. If the price decides to go up I've not lost too much and will then have to wait until the first PSAR dot actually does appear at the top if the price then decides to move down again.

Fourth: If you're lucky like me - you don't necessarily have to set stop losses. Got you there!!! No - what I'm saying is this: at Delta - instead of setting a stop loss - I can place a stop order to close my initial position and then open a new position in the opposite direction thus giving me an immediate stop and reverse. In other words - let's say I opened with 1 lot. Instead of setting a stop loss (of course based on the value of PSAR) I place an order to 'dispose' of 2 lots in the opposite direction. The first lot will be closed and a second lot will then be opened in the opposite direction thus an immediate stop and reverse. Be careful though - if I did this at my other two brokers I would land up with a hedged position which almost always turns to 'sh1t'. The only way to accomplish this at these two other brokers would be to place a stop loss AND a stop order in the opposite direction and then hope like mad that they BOTH get executed ON TIME AND AT THE CORRECT PRICE!!!

Regards,

Dale.

[dpaterso]

OK - well - I have just 'second guessed' the indicator again on EUR/CAD (see attached chart) i.e. Parabolic SAR has been penetrated.

Actually - it's not 'second guessing' the indicator - if you really think about it - had I been in a trade prior to the penetration - I would have stopped and reversed at this point anyway - the only difference being that you don't have a corresponding PSAR dot or value to use for your stop loss at this point.

I must just tell you that this is really 'unstressful'. My (one) trading platform will automatically send you an email when a stop is hit so I just redirect these emails to my cell phone so that I know if a stop has been hit - so as long as my cell phone does not go 'beep' I know I'm still trading in the right direction! So far - no beeps - since last Thursday!!!

Oh - and by the way - EUR/SEK is getting close now.

Regards,

Dale.

[ccox]

Just wanted to share.... I don't know if its beginners luck, or a testament to the effecitveness of this system but.... I'm currently in 3 positions. Long USD/CAD & EUR/USD & short USD/CHF. And I'm in positive territory in all 3.

I'm using 4 hour and day charts. A week chart on the USD/CAD, I noticed a new parabolic dot opened on the weekly chart for this currency pair.

My question is... what is an effective strategy for exiting a position. My charting package don't have an accelerating/decelerating ossicilator. At least I havn't found it yet if it does. Are there any other technical indicators I could use?

thanks

[dpaterso]

Hi.

I hope (for your sake and mine) that it's not beginners luck!

It might make you feel better to know that I now currently have 27 open positions / 27 pairs and only 4 of them are showing a small loss at the moment - the others are all in the green.

As far as an exit strategy is concerned - remember that your stop and reverse is (supposed to be) your exit strategy if you are basing your entire 'system' on this indicator. I know that the most difficult thing in the world to do is to stick it out until the stop and reverse comes. It's so difficult because you know that at some point the huge profit that you may be showing on a position has to reduce at some point in order to get to the stop and reverse point. The hope is that when it eventually does reverse you have already locked in profits well down the line so that when the stop and reverse point gets hit your profit does not get reduced by too much. On the other hand I've had a look and found many trades where a trend has started and just kept going and going to the point where Parabolic SAR only gets penetrated with small loss of a couple of PIP's when 'violent' reversal comes - that's the ideal situation.

Regards,

Dale.