Parabolic SAR - that's all!

[jw44]

What I have bee doing in my demo accout. Is to use it on the daily chart to get in. But, not to set my stops. Sice I had to change demo's. Time expired, I got in some late. But, I am still $6,000 -$8,000 ahead.

[Ingot54]

Dale - firstly ... let me encourage you to keep EVERYTHING together on one thread - this is important so that we can all stay together. The danger is that we will lose the work you have already done, or all end up following different threads and missing the main one.

It matters little what transpires during the journey ... at the end it will be clear that we left no stone (or indicator) unturned in the quest.

I really like your original hypothesis ... (remember your famous one-liner: "I'm so happy I could sh*t!")

Well, the PSAR signal used over daily or weekly TF are great, and I hope we don't move away from that. The evolution here is a result of trying to place the PSAR in its rightful environment ... TRENDING. We have to be careful that we don't introduce too many other indicators out of a mercenary desire to jump into trades.

If that happened, the PSAR could be relegated to just another signal, instead of the main game in town. I have never felt at ease with stochastics, and rarely take much notice of RSI, but I have trading friends who do use them well.

I really do like the MACD, and I'll explain ...

MACD is unique because it is both a LAGGING indicator and a LEADING indicator, as well as a MOMENTUM indicator. As such, I am hopeful that it will come up trumps as the ideal companion to accompany your PSAR in formulating the ideal system. Used correctly, I don't think you need any other.

One of the most important principles in Technical Analysis is that MOMENTUM peaks before PRICE. In other words, momentum provides a warning that decline/rally in the price may be imminent.

Just to rehash, for those who need to understand MACD a bit better ...

The standard (or default) model for MACD is the 26-12-9 setting, but as I shall show later, other settings do have a useful place.

There are 2 lines formed in drawing the Moving Average Convergence Divergence Indicator. The first is the "main" line, formed by subtracting the 26-period EMA (Exponential Moving Average) from the 12-period EMA. After that line is constructed, a 9-period EMA of THAT line is overlaid on top of it, and we call that the "trigger" line or more commonly the "signal" line.

The most important signal MACD can provide us is the CROSS of the ZERO line. Depending on the cross, the signal is bullish or bearish ... no need to go further on that right here.

Gerald Appel who devised the MACD recommended the following setting be applied:

17-8-9 for BUYING
26-12-9 for SELLING, following a strong bullish run.

I am uncertain how to apply that, given we go long/short on currencies. I have the opinion that one will get us into position faster at the beginning of a move, while the other will assist exit at the completion of the move.

Using daily or weekly TF excludes much of the "noise" and should see the account build nicely with little stress. (Ka-Ching! ... love that sound!)

MACD can be used with or without the histogram. The histogram is not essential, but is a strong visual aid or visual signal which becomes very useful when flicking through many charts to select trading candidates for the watchlist. It is good for traders to learn to do without the histogram initially, until they become adept at spotting the EMA cross-overs, and learn to spot the crosses at the zero line. After that, the histogram can be used to speed the process.

So ... with that background, how does the MACD signal that the chart is TRENDING, and thus validate the PSAR signal? Remember it is a leading/lagging AND momentum indicator, so it will quickly point to trend reversals ... the perfect partner for PSAR.

To check whether the currency is TRENDING see where MACD is in relation to the ZERO line. If MACD is FLAT or stays close to the zero line, the market is RANGING, and you simply put that trade on the back-burner and move to the next chart. No use trying to force a trade if the indicators are warning to "wait".

However, and this is the biggie ... IF the MAIN line crosses the SIGNAL line from below the zero line, it is a STRONG signal to go LONG.

If the MAIN line crosses the SIGNAL line from above the zero line, it is a very strong SHORT signal.

If the PSAR agrees, then we have ourselves a very juicy trade.

We don't need to be trading too many at a time - far better to load up on the successful trades, than spread the margin too thinly on multiple trades.

The reason I say that is because the higher liquidity pairs are the ones with the USD, plus the GBPJPY or EURJPY. There are usually about 8 currency pairs eligible. You might not get much action initially, but you should find that as you get established in this system, you will be more waiting for an exit signal than an entry signal.

And remember, it is in the exit that the money is made.

Hope that makes sense - and please add to, or correct where I may have erred.

[pip huntter]

hello every boday,

Dale i am with Igot to keep every thing in this thread.we already posting our knowledge here and i think that will mae it intresting more and more.

Well guys we do have lots of indicators now!! i don't know but i feel if i am going to use the PSAR , MACD ,RSI,AND STOC.that will probebly end up with 1 trade a month. i know it will be the winner trade but also i feel we will lose good ones as well.

So fpr the PSAR and MACD i feel they r perfectly working together.i checked them and yes IGOT they r telling u when the market is going to be trending and when it doesn't.if we r going to follow what IGOT is saying with the MACD and it's realtion with PSAR.

I will try the MACD and the PSAR i think that will enough i hate to look to my charts while it has too much signals and indicators on it!! i feel bad for myself.

I don't know but i feel that the market is not moving so fast today or even yesterday i hope that coz they r waiting for the US to anounce there intrest rate and then things will go normally after that.

Akram

[pip huntter]

hello guys,


Ok now i have to admit that i am either understand the book in a wrong way or i really undesrtanted in wrong way!!!

Well i am talking about the intrest rate

so when ever the intrest rate is less than what it is then the curency of this country is going to be droped and the vise vera.

Sorry if i did misslead any one of u guys.After today the doller went crazy down with all the currencies when the announce that the intrest rate is droped by 50 points.

Dale u r right i think i understand it wrong and we should mention it here clearly and loud so no one get confused like i did before!!

By the way Dale i followed what u said for the intrest rate although i wasn't acutualy sure aboiut it but i went on selling the doller and i got some pips which has nothing to do with our strategy coz i have no vailed PSAR yet i was board for keeping my self away from the market for couple of days doing nothing coz of that but i am back with some gain not bad!!

I wonder when can we have a vaild signal this week is amlost gone!!

Regards,

Akram

[pip huntter]

ok Ingot

I checked the MACD again with the psar and u r 100% right if we will take our postion based on Psar when they show in an opp. direction and our MACD is crossed over (far than 0 up or down) this is a very profitbale trade.

What i did is that i am attaching 3 files

1- file to those who is using the MT4 as they don't have the MACD indicator like 2 lines so this file if u download it, copy it and paste it into your indictor list u will be able to have it same like Dale's Broker


2-is a file that when u download ,copy it and paste it into your Indicator list u will be able to use it as a sound entry when the MACD cross over. it will give u a beep some times the PSAR shows and the MACD don't cross over yet so it will never give u a beep it can give u a beep when MACD cross over it can be after the PSAR dot appears in the opp. direction with in 2 or 3 days if the MACD is still away from the 0 it is still a vailed entry.

3-is a graf for GBP/USD from previous days that will tell u when to sell and when to buy based on Dales. PSAR and Ingot's MACD

so basicly these files is going to do what Ingot was trying to tell us beside they will give u a beep once the MACD cross over all what u have to do is that u have to check for the PSAR (Dale's system) if they r shown in the opp. direction then u open the trade based on the PSAR directon. some times MACD cross over after the formation of the dot with 3 days (3 bars) this is also a vailed entry.

Have a look on the charts it has like 4 vailed entry as shown .and all of them were a dam proffitable ones!!(wish i had them before!!)

These 2 files are for the traders who have the MT4 all what u have to do is that u have to download them unzipped them go offline with your trading software copy the files and past them under program files/MT4/Expert/indicator and then open your trading system go online click on insert/indicators/customs and then apply both of them into your charts and choose the 1 day time frame. then Bingo!!

Dale and Ingot have a look guys it is very intresting files and please guys give me your feedback. offcourse all of u r welcome to comment as well.

Regards,

Akram

[mike1349]

Originally Posted by Ingot54

Hi Dale and other enthusiasts-soon-to-be-wealthy! l:^))

I have sumarised your system Dale for easier reading (just my view) and to make it easier to print out. Hope you don't mind. I think this is an extraordinary thing you have accomplished here - not without pain either.

I think there is a bit more room for refinement eg limiting the signals to either RSI or Stochastics but not both. This would give you simpler charting set-ups (more screen 'real-estate' to view) and I do not think it would affect profitability much ... if at all.

Anyway, while it has not been declared 'finished' officially, there may still be time for me to muddy the waters (heh heh):

Dale’s Daily PSAR

bars) AND are still above 50.
MACD has crossed down.
Akram's 'Alligator' lines are NOT intertwined (or 'look' like they are changing direction). i.e. at very least the 'lips' (or green line) must have crossed the 'teeth' (or red line) and the 'jaw' (or blue line))
ADX is equal to or above 20 (and/or ADXR must also be above 20)

Additional guidelines:

Don't base 'entry' on RSI and Stochastics - but base your 'non entry' on RSI and Stochastics. ie - If RSI and Stochastics are NOT at their limits then take the trade.
Put another way: - If RSI is above 70 and Stochastics are above 80, a PSAR entry signal to go long then that trade would be a disaster.
And vice versa: A PSAR entry signal to go short when RSI is below 30 and Stochastics are below 20 would be foolhardy.

As long as RSI is between 0 and 50 and Stochastics are between 0 and 50 - with both pointing up preferably - then take PSAR entry signal to go long - and if RSI is between 100 and 50 and Stochastics are between 100 and 50 - with both pointing down preferably - then take PSAR entry signal to go short. This would increase the number of 'valid' trades.


This will certainly limit the number of trades available - BUT - if all of the above criteria are met – it is almost 100% sure that the position is a 'winner'.


I did see your earlier comments ... yes we do have Captain Morgan here in the antipodes, but in limited supply - the locals keep drinking the stuff - we have been experiencing severe drought here, and we are saving the drinking water to wash in ... for as long as the rum lasts!

With best wishes

Ingot

Thanks for input.
I am just wondering what parameters(numbers) do you use for these indicators.I don't know if there is any post somewhere to tell me about that.

Thanks
Mike

[pip huntter]

Guys,

As for the chart i attached eariler GBP/USD and it has 3 trades profotable one from the period of 19 jun till 12 sep almost 2 month for one pair if we had this trade we would get 925 pips on this pais.just thought it is something intrested for u to know

Akram

[Ingot54]

Thanks for input.
I am just wondering what parameters(numbers) do you use for these indicators.I don't know if there is any post somewhere to tell me about that.

Thanks
Mike


Hi Mike

I can not give too much help with those numbers.

I would imagine the RSI at a setting of 14 would be fine, given that we are dealing with the daily and weekly charts. I have not been using RSI because it is an oscillator the same as Stochastics (doubling the indicators and reducing the screen real estate for viewing the chart).. I found Stochastics to be more responsive.

As far as Stochastics go, I used it only with MACD, and looking back at some old charts I posted on TopStocks.com.au (Forex Trading threads) i used 2 different combinations as follows:

MACD 14-3-3
Stochastic 5-11-3
_____________
MACD 7-11-3
Stochastic 8-4-4
_____________

I remember fiddling around with those for about half a day to get them to closely match the chart action. And both combinations work with Daily TF.
The difference between them is subtle, but it is in the response speed to price action change.

Hope that helps
Best wishes

Ingot
________________________

Guys,

As for the chart i attached eariler GBP/USD and it has 3 trades profotable one from the period of 19 jun till 12 sep almost 2 month for one pair if we had this trade we would get 925 pips on this pais.just thought it is something intrested for u to know


Cut it out Pip Huntter!

I am already feeling bad enough because we haven't finished this off! (Just kidding mate!)

But this is exactly what Dale set out to do - to capture these really good pip moves, without staring at the screen all day.

Thanks to all the good input and hard work by you guys I think we are very close, and I think we actually have one of the very best systems I have ever had the privilege to experience.

I think when the polish goes on this system, I am going to nominate it for "Babypips System of the Year". l:^))

Anyway guys - that is for the near future ... just a little further to go now and we'll have it spot on.

Thanks for your perseverence Pip Huntter, and of course Dale, and the other guys who have kept this thread alive. I am really grateful for the effort. Fantastic stuff.

Best wishes

Ingot (Already counting pips and money, and dreaming of that world trip!)

[pip huntter]

ok Ingot,

i will keep my mouth shut!!but i was trying to tell every body that what u posted eariler about the MACD is really very nice to use with the PSAR.

Dale u still there??!!

I guess u eaither are counting the pips u gained today or u r busy with the withdrowal u r managing to have through your broker!!!

Regrads,

Akram

[Bocajunior]

Evening all,

Some great responses yet again and thanks to all for the contributions. I like your work on the MACD Ignot that will require more reading on my part.

Originally Posted by Bocajunior

Over the last week I took the following pairs based on the Pure Parabolic SAR alone and although I was showing profit early on, they are totalling a slight loss now. But I am going to ride them all out and see how it goes:-

AUD/NZD - short
AUD/JPY - long
EUR/JPY - long
EUR/AUD - short
EUR/CHF - long
GBP/USD - short
NZD/USD - long
USD/CAD - short
XAG/USD - long

Thanks.

At present, all of the above pairs are now showing profit, due to a dramatic turnaround overnight. I am playing with the idea of takeing some profits as there is a lot of money on the table right now. This requires further thought.

The GBP/USD position, which was in profit yesterday afternoon to the tune of 200 pips, I closed it manually today for a 40 pip loss. This was a mistake on my part as I should of closed it manually yestreday, as the fundamentals were all pointing to a GBP rally against the dollar with the Fed interest rate cut. Possibly, in the future, I may close positions based on fundamentals instead of waiting for the SAR to reverse. Again, more thought and study required. All opinions welcome.

Over and out for now.