Hi I have been backtesting RSI, stochastics, bollinger bands, 3,5,10,20 EMA’s in isolation or combination and came to one conclusion. The only accurate and suitable indicator out there for daytrading or scalping is PARABOLIC SAR. Although considered by many to be the most inaccurate, I find it to be far more accurate than any other indicator out there! You just have to buy/sell the moment the dot appears, and hold your position until the opposite dot appears. It hardly gives of wrong signals, and the only problem with it is that it can whipsaw, but this only happens in 1 minute charts (and peersonally, I quite like whipsaws, because they help me get out of losing trades even before my SL).
You hardly see any parabolic sar whipsaws from 5 minutes onwards. My returns on demo account based on parabolic have been $2000 - $20,000 in one day from 11 trades. The accuracy is a startling 80%, compared to stochastics and others according to my journal which only has 50 or even 40% accuracy. I also noticed that parabolic SAR is rendered inaccurate if combined with another indicator, it HAS TO BE USED ALONE.
Go on and try it in a demo account. You’ll be amazed by the results! (if you make a loss, I’de be very interested to hear about it!) I only have 2 questions:
- Why is it so accurate?
- On what basis is parabolic SAR calculated? I can find info on all indicators except parabolic SAR.
How to succeed with paraolic SAR:
Don’t wait for the candle to finish forming. The moment the dot appears, you follow the signal and buy/sell (your profits will mostly come from this first candle)
You quit only when the opposite dot appears OR more effectively, when you get 5 pips. In my experience, 5 pips will give you a 80% trade success rate, whereas waiting may give you 4 times more pips but a lot of breakevens so you end up making less money
Use parabolic SAR only in 5 minute charts. 1 minute charts whipsaw too much. and 10 minute charts above are usually too volatile to have any trends. But on the level of the 5 minute chart, micro trends can be seen, and it is where there are trends, whether they be normal or micro or medium, where parabolic SAR shines