Hi Guys,
I am relatively new to this game but my studies so far have led me to using a PSAR alongside MACD and Stochastics. I am having a little bit of success which is great but I was wondering if anyone can offer any advice on using PSAR as an entry signal??
Any help would be great.
Thanks
Tom
You can use the parabolic sar for whatever you like.
If your system shows you that it is profitable.
That indis have a classic function doesn’t say they can’t be useful elsewhere.
Plus I believe it is a good chance to find a very profitable system, to play a bit outside of classic views. I guess you will be way more profitable with your very own system than to copy any 40:60 rrr system which can be found everywhere.
I have a 30:1 system so far and none of the components are “classic”. Moving averages and all that has not really a very good chance probability. They are lagging and can tell you what the average price is. But they can’t tell you whether it’s time to buy or sell or where to put your stop loss.
In fact I use the parabolic sar for my system. Not for entry, though. Not for setting sl, what is the classic function, either.
However, most important is price action. Nothing can beat price action. Indis can just confirm, but they have no intrinsic information other than price.
2 pips of mine. 
my personal experience from psar is that it lags way too much.
Hi,
There is an entire thread dedicated to various of J. Welles Wilder’s indicators and trading systems (and ignore my disclaimer at the beginning of the thread i.e. some of those systems DO in fact work and it was obviously just BACK THEN that the issues with the systems were more due to lack of experience and incorrect risk management than anything else).
The above being said: I to consider myself an ‘expert’ (the true definition of an ‘expert’ being ‘a hasbeen drip under pressure’) on Wilder’s indicators and trading systems (believe me when I say I’ve studied them for at least four years now)!!! So: let me give you a way to use Parabolic SAR which WILL improve it’s performance.
Parabolic SAR has an inherent problem in that (as somebody has noted) it does lag (and this is a very big problem in the FOREX market). If you’re going to use it then try this: DO NOT simply buy or sell when you get the FIRST and INITIAL Parabolic SAR signal (as would normally be the case). This leads to MANY ‘whipsaws’ which, over time, WILL ‘eat’ your account. Rather: combine Parabolic SAR with Bill Williams’ Fractal Indicator or a variation thereof i.e. instead of using the default of 5 bars that are needed to generate a Fractal you can use only 3 bars. WAIT for this signal and place an order to buy or sell in the same direction as indicated by Parabolic SAR. This will eliminate MANY MAY ‘whipsaws’ with Parabolic SAR. Yes: there WILL be times when you miss a ‘stirling’ Parabolic SAR trade but believe me when I say that these are very few and far between and they don’t make up for the losses caused by ‘whipsaws’ over time.
I’ve attached chart detailing what I mean above (I’m using ACTForex’s charts because they allow you to select the number of bars used to generate the Fractal but really: all a Fractal is is a high or low swing point so you should be able to recognise these points without the indicator but the indicator makes it easy I guess).
I hope this helps and eliminates many of your potential losses.
Oh and of course: use Parabolic SAR once you’re IN the trade as described above to lock in profits / limit losses.
Regards,
Dale.
Edit:
One thing VERY important: PAPER TRADE this (not automatically BUT ON PAPER) and you’ll see what I’m talking about above. You’ll also find that this works better on particular pairs than others (EUR/CHF is a good example). Also: Parabolic SAR is NOT Wilder’s ‘best offering’ (take a look at Wilder’s Swing Index System for example).
eurusd daily actforex 5 bar fractals parabolic sar.zip (72.1 KB)
Thanks for all your help guys. Very much appreciated.