Parabolic SAR - that's all!

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2159

Good luck mate! :slight_smile:

I too am pretty excited, I’ve been testing loads of systems and indicators since December, taking the good things from each one and mixing it all into my very own “Holy Grail” system. I believe there isn’t a one-size-fits-all perfect system, everyone has a different trading personality and its respective Holy Grail, you just have to find it.

Starting today I am trading daily charts only, with a set of rules that proved to be profitable in the past with shorter time frames, but my tests showed that they will much much better with daily charts. It does have PSAR, but not the way most people use it… :wink: More on that as soon as I start making some decent live trades, don’t want to jinx it :smiley:

Just remember this Dale, [B]FOLLOW THE RULES OF YOUR SYSTEM![/B] Trade what you [B]see[/B], not what you think!

2160

Looks like we have some good stuff going here. Still, as a brand-newbie I had to come to a conclusion in my own mind as to why Dale’s PSAR system was so successful during the volatile month of August - the month with the fewest trades and when the banks can most easily manipulate even a market as liquid as forex.

I previously posted that my Relationship Manager indicated August is the most volatile month which would be of benefit to PSAR systems. But why does low trading volume make the market volatile (this is for my own education and that of other newbies)?

Well, from my research, traders (both individual and institutional) are no doubt looking at support and resistance levels within whatever system they are using. Different systems will often have similar resistance/support levels because everybody is looking at the same charts. If a pair is trending down, it will no doubt have up and down ticks to a certain resistance level during the down trend. When the resistance level becomes fairly obvious, there will be a lot of stops above the resistance level, as well as other orders where traders are looking for a reverse to an up trend.

Banks play a large role in the forex market from what I have learned. Customers of these banks place a lot of orders, and in many cases these banks earn a commission if and when these orders are executed. Because of this, a large group of orders (concurrent with stops) above the resistance level becomes an attractive target for the banks, and if they can manage to push a currency pair up above resitance the orders (where there are also a lot of stops) sitting above resistance gain them commissions. It would seem that by moving his stops with the each new PSAR dot, Dale was avoiding this and trading with the overall trend - even when it reversed. In a more liquid market (like most of the rest of the year) the banks can’t manipulate resistance/support so you get more of a range around resistance/support (even when there is a long term trend up or down) that is not beneficial to the PSAR system.

Normally forex is too liquid for banks to manipulate it - except during periods of low activity like August, which can cause wilder and longer swings due to bank manipulation. Trends can be longer as they break resistance/support due to bank manipulation but don’t necessarily reverse for some time, yet Dale had the PSAR system prepared for the reverse after many pips were made on, say, a long downtrend, and then he took advantage off a longer uptrend due to this bank manipulation that caused volatility and often longer trends.

Anyway, this is how I understand it, and I just wanted to clear it up for myself and other newbies. Anyone feel free to correct me if I am wrong on this. If you read this whole thread like I did, I had to ask myself why Dale had so much success in August.

While I am working on developing my own trading methods, I think when this August rolls around I will give the simple PSAR system a shot for the month, and who knows, this could become an annual way to make some good pips each August.

2161

You just have to look at August 2006 to see that it’s not an August fenomenon. That month was choppy with a capital “C”, unlike August 2007 :).

The more liquidity that a market has the bigger the chances of finding strong and sexy trends. Why do you think EUR/USD almost dies after both London and New York close? No liquidity = no movement in most cases, not just currencies, but commodities and indices as well.

What we had in August 2007 was the explosion of the subprime mess, with carry trades stopping, risk appetite dropping, interest rate cuts speculation, GDP revisions, recession fears… and all that caused a lot of violent moves on the currency markets.

If Dale had not messed around with the rules of his systems, he would have made a huge profit in September as well. August was good, but it wasn’t the only good month of the year, far from it.

Moral of the story, follow the rules of your system (as long as it has proved to be profitable) :slight_smile:

2162

Hello,

OK, I’m not in bed yet (I always find something else that I want to check before I’m able to sleep)!!!

First:

PipAddict:

Trade what you [B]see[/B], not what you think!

Thank you, and THAT is good advice for EVERYONE INCLUDING MYSELF!!!

Tom:

I appreciate your post and insight. I have another theory for my ‘August windfall’ though i.e. if I remember correctly it was just around the time when the sub-prime ‘debacle’ began and I do remember quite clearly that I made a whole lot of money at the time being short the USD on every single USD/??? and ???/USD pair available to me at the time. Now whether or not this situation was ‘amplified’ due to the low volatility that you mention I do not know and cannot comment on.

2163

Hey PipAddict, that was funny: ‘great minds think alike’!!!

We were ‘overtyping’ each other and just look at the similarity between our messages!!!

Now that we’re expanding on my ‘mess’ of last year I also remember that straight after my ‘windfall’ everything seemed to ‘die’ for a little while i.e. I waited endlessly for some new Parabolic SAR entry points and they simply did not ‘arrive’. I remember also that I got ‘cold feet’ when I saw the $50K or whatever it was and ‘bailed out’ early i.e. I did not wait for Parabolic SAR entry stop and reverse signals and the problem with doing that is, of course, you could wait for days, and even for weeks, for new entry points. This of course led to frustration, impatience, and attempts to repeat my ‘windfall’, all of which resulted in a ‘wipe out’ on the ‘grandest of scales’!!!

Personally, I don’t think it had to do with August, the moon, fractals, or anyting else like that i.e. it was just ‘plain stupidy’ and lack of knowledge and experience and, above all, lack of discipline, patience, and the inability to ‘stick’ with a system that actually worked. I also remember ‘b*tching’ about the fact that I had taken profit early because had I not done so and waited for valid Parabolic SAR stop and reverse signals there would have been more profit at the time and had I just ‘stuck it out’ with Parabolic SAR at the time, even if I had ‘falsely’ stopped and reversed, the next stop and reverse would also have resulted in major profits as the USD fell further. Bottom line (for me): I still have absolutely no doubt as to the merits and effectiveness of Parabolic SAR. It just simply does not suit my trading style (and of course I’ve been very humbled by my experiences back then).

Now I AM going to bed!!!

2164

Thanks for the input! Helps me learn. I really am brand new and have never traded anything in my life and don’t expect to trade a pair for a few months yet as I read up and demo trade.

Seems like August was the perfect storm - especially for the USD. Things to log away…

Thanks again for the input, and also in your in your post, Dale. I look forward to following this thread and what you all are up to. Perhaps in a month or two or three I will be able to offer some helpful insight myself.

– Tom

2165

Good morning all (well, it’s not so good for me at the moment i.e. far too much rum last night, not feeling good)!!!

Anyway, life goes on!!!

Is there anybody out there that has ‘New Concepts In Technical Trading Systems’ and has had a look at, or is using, ‘The Swing Index System’?

As you know I am using the SI System exclusively now and everything is perfect except for one thing and that is the calculation of the value of the ‘Trailing Index SAR’ and it’s driving me ‘nuts’!!!

The problems (I think) are as follows:

When the book was written (and I’m not too sure if these ‘rules’ are still in place today) there were ‘limits’ imposed at the exchanges in an effort to avoid ‘panick selling’ (for want of a better phrase or description) e.g. in 1989 there was a ‘limit’ of 50 points imposed on the Dow (down from 80 points) and the idea was that if the index dropped by 50 points or more then trading was halted for a period (half an hour I think or something like that). During that period only buy orders could be executed. The idea was to curb volatility and give traders and investors time to ‘cool off’ before deciding to short the Dow again thus avoiding the ‘cascade effect’ or ‘panick selling’.

Now my problem is this: (as I said before) I don’t know if these limits are in place today or not at the exchanges but suffice to say, even if they are still in force at the exchanges, they certainly do not apply to the forex market. That is problem number one. So how do you ‘eliminate’ this ‘limit’ from the equation WITHOUT affecting the ‘desired’ or ‘correct’ resulting ASI value? You cannot make it ‘0’ because then you are dividing by zero which of course gives you an error and you cannot make it some ‘ridiculous’ figure either (like ‘999999’ i.e. you are ‘saying’ that the maximum allowable move in a day is ‘999999’ i.e. this limit would NEVER be reached by ANY instrument in a day).

The above is causing me ‘endless grief’ in the calculation of the ‘Trailing Index SAR’ as well. For example: if you use Wilder’s ASI calculation EXACTLY as it is in the book applied to the Dow the ‘Trailing Index SAR’ when calculated is so close to the price that I’m convinced that it’s wrong BUT if you use Wilder’s ASI calculation EXACTLY as it is in the book applied to Soybeans then the ‘Trailing Index SAR’ ‘looks’ right i.e. it’s not too far from the price but far enough to allow for a ‘decent’ move before signalling that it’s time to place an order that would result in a ‘stop and reverse’ if ‘hit’. On the other hand if you apply the calculation EXACTLY as it is in the book to Silver (the price of Silver is quoted in exactly the same way as commodities i.e. ‘99.99’ or ‘$17.50’) then the value of the ‘Trailing Index SAR’ is so far away from the price that it would NEVER get hit. Again, I’ve ‘played around’ with this and the only thing that I can come up with is that it MAY have something to do with the ‘value’ per pip movement e.g. when Soybeans moves a couple of cents then the profit or loss could be, let’s say $10, BUT when Silver moves a couple of cents then the profit or loss could be, let’s say, $100.

I don’t know what to make of this and, like I said, it’s driving me ‘nuts’ so any input would be appreciated (and believe me that I am not asking this question because I’m too ‘bone idle’ work it out for myself i.e. I have spent AT VERY LEAST three months trying to figure this one out. I’ve even looked on the Internet for an answer or to see how others have ‘coded’ the ASI in MT4 for example and I can tell you that I don’t see this being ‘coded’ ANYWHERE correctly i.e. I saw one example where the ‘limit’ was simply multiplied by 100 making it 300 and I can tell you that if you used THIS figure for the ‘limit’ when you calculated the ‘Trailing Index SAR’ for a forex pair you again would have the same problem i.e. subtracting 60 points from this figure would result in a ‘Trailing Index SAR’ value that is so far from the price that it would NEVER EVER get ‘hit’).

2166

Hello D.Paterso,

very appreciate all those ‘‘gurus’’ posts here. It’s very nice when
you can to read all those very quality information about SAR.

I’m also using it every day, like it very mutch and it’s very helpfull
thing for me in free trading, when you must be quick and have
bright information!

p.s- few screenshoots about market this minute ( you can see MACD, SAR, PRS, RSI and some others things)

[I]eur/usd[/I] macd + sar + …
http://img516.imageshack.us/img516/9019/eurusdprs1vp3.jpg

[I]usd/chf[/I] macd + sar + …
http://img174.imageshack.us/img174/1600/usdchf1nh9.jpg

[I]prs[/I]
http://img146.imageshack.us/img146/1866/prssz2.jpg

Enjoy trading!!!

Dale, nice to meet you

Regards,
Goran

2167

Hi Goran, and welcome.

I must say that I have no idea what the ‘PRS’ ‘thingy’ is but it sure looks interesting. I’m assuming it’s some type of ‘instrument scanner’ right? Can you add Parabolic SAR to it and scan for entries (like Easychart for example)?

2168

Dale, I’ve copy/paste officially IBFX information about PRS:

What is IBFX-PRS?

IBFX-PRS screen shot At the core of any successful trader’s technical analysis there lies the ability to spot forming and completed chart patterns. It is no secret that price consolidation in many forms almost always precedes the strengthening of trends, or the reversal of price directions. For over a century now traders have been looking for ascending and descending triangles, rising and falling wedges, and flags and pennants as a means to recognize price consolidation and to prepare for price breakouts.

How Does it Work?

The IBFX-PRS scans multiple currencies and time frames looking for price consolidation patterns. When a forming pattern is identified, traders using the PRS will be alerted. Completed patterns offer traders a look at where the price direction is most likely to head, thus offering a potential take profit region. The IBFX-PRS can be used to spot potentially strong trades, or to confirm the strength of current positions held.
**

Example during the free trading, you must be very quick, PRS helps me for every single alert in the stock market. For every each pattern you can see what is going on. Somethimes is quite difficult check all 12 big screens :slight_smile:

Exmple: GMT+1 (here in Croatia) 13.04 AM

                   Complete Patterns

[U]Symbol[/U] [U] Interval[/U] [U]Pattern[/U]
AUDJPY 60 minute Ascendit Triangle
EURCAD 60 minute Rectangle
.
.

                     Emerging Patterns

[U]Symbol[/U] [U] Interval[/U] [U]Pattern[/U]
NZDUSD 240 minute Ascendit Triangle
EURUSD 240 minute Ascendit Triangle
.
.

The same when you use your mobile and got sms…the beep signal. But here
is real time, very easy to use, to see whats going on. Also very interesting
when you combine trading with small and big investors.

Regards,
Goran

2169

Hey thanks Goran for that info.

I figured it was something like that (I have the same option with Easychart except that it’s not quite that ‘fancy’ i.e. no SMS alerts or stuff like that).

Oh, and by the way, for anyone that was intending helping me with the ‘Trailing Index SAR’ and ‘limit move’ ‘issues’ don’t worry i.e. it’s FINALLY ‘sorted’ (I had another one of those ‘lightbulb moments’ today)!!!

2170

Dale you are welcome!
I put today a new topic (FAQ) about PRS.

Also thanks for those great post’s of SAR, it good reason to check forum
every day :slight_smile:

Regards,
Goran

2171

Hello again,

Yes I read your post in the new thread you started. Very nice of you.

By the way: I did not know that InterbankFX was an MT4 broker (the last time I looked I’m almost sure that they had some or the other Java based platform but maybe I’m confused i.e. it was a very long time ago). How do you find them as a broker (the reason I ask is that I have not read very many good reports about them although admittedly I’m only talking about posts on Forexbastards)?

2172

Thanks Dale

I didn’t know that for their low reputation. Lot of people witch I know in Forex World trade with InterbankFX (IBFX). Almost 95%!
I’m using MT4 becouse very quick support, very easy and safe software. If you are good programmer you can put your own charts, also install trade station on your smart phone or phocket pc.

Now they are winners for ‘‘The Best Foreign Broker in 2007’’.

Here is the link: http://www.sharesmagazine.com/ext/awards2007/Nominees.html

MT4 isn’t the only one software, other is DealBook360. Last week I put this software for trading, at first few weeks it will only be a demo account, becouse to see a strenght. I don’t know lot DealBook characteristics.

‘‘Time will see everything’’ I don’t know if this is a good phrase

2173

Hello,

OK, now you’re ‘refreshing’ my memory i.e. ‘Dealbook’ is the software that I saw when I was looking around for brokers and it’s this software that I was not impressed much with but I have used MT4 and it is very good and very ‘polished’ software.

I should maybe not have said what I did about InterbankFX as I have never traded with them so I don’t know how good or how bad they are. Like I said: I’ve only read some ‘not so good’ comments on Forexbastards about them and for the most part, in all fairness, I think that all of the ‘bad’ messages on Forexbastards are left by people who have lost money due to their own bad trades and not because the broker is ‘ripping them off’. Although, having said that, I had a good ‘chuckle’ today about GCI: I was in a trade that I was just not happy about and it had turned into an ‘ever so slight’ profit so I tried to close it and ‘not a f*ck’ would the desk close the position i.e. just requote after requote after requote. So, I thought I’d ‘catch’ them at their own game so as soon as the position turned to a $0.60 loss I tried closing again and ‘whoalla’ the position was closed IMMEDIATELY. I can only ‘deduce’ from this that their computer system ‘alerts’ the desk that you are trying to close out a position at a profit and they try and ‘scalp’ a few pips off of you BUT if the position is in a loss, no matter how big or small, then there is probably no ‘alert’ and the order is executed immediately. It brought back old and ancient memories of when I first started trading at GCI but I’ve learned: at GCI there can be no such thing as a ‘short term trade’ i.e. if they try to ‘scalp’ 10 or so pips off of you when you’re closing a position that you’ve had open for a couple of days and is showing a nice profit then it’s not problem i.e. let them HAVE their few pips (over and above the spread, interest, and commission of course) but do not try and ‘scalp’ the market with them (especially not on ‘exotic’ pairs)!!! Anyway, no ‘biggie’, I still love them!!!

2174

Hi Dale

I have made it to page 44 in this thread and just wanted to say thank you for sharing your system and experiences with us.

Only 170 pages to go…
but it is definately worth it!

I am not going to ask any questions till I read read it all. Should take another week or so work permitting, so chat to you then…

keep it going!
Brendon

2175

Hi Brendon (‘my china’)!!! (I KNOW I don’t have to explain that to YOU)!!!

How are things over there?

Things were pretty ‘dismal’ here up until this past week with the Eskom ‘power thing’ and all but it seems to have (or at least I hope it has) ‘settled down’ (for a while anyway).

Hey listen: don’t be ‘shy’ to ask questions without reading the entire thread i.e. everybody else does!!! I’ll try and help out as best I can BUT, of course, for the reasons mentioned on more than one occasion previously, it’s advisable to go through the whole thing so that you can see what happened, get a REAL ‘feel’ for this ‘trading thing’ through the eyes of a bunch of amateurs that were not afraid to share their ups and downs and ideas and, I reckon, it’s pretty good preparation for what MAY come your way AND (hopefully) it’ll ‘spare you the grief’!!! We all like to think we are truly different and ‘special’ individuals but I can tell you that the market is ‘the equalizer’!!! It’s real funny you know: I’ve been ‘mentoring’ someone on ‘The Swing Index System’ for the past two weeks or so. This person has never traded before and after seeing my results with the system decided to ‘give it a bash’ (which is surprising because she knows ‘first hand’ of my past losses). Now let me saw this: this is probably one of THE most ‘together’ and ‘headstrong’ and ‘methodical’ people I know. What surprised me is this: in only a very short space of time did I see her starting to ‘react’ to the market and get ‘emotional’ in EXACTLY the same way as I did in the beginning and and in exactly the same way as I continued to react for the good part of a year (last year). Even although I was EXTREMELY EXPLICIT about ‘waiting for the set up to occur’ and had given very strict instructions to NOT overtrade her account I watched her ‘second guess’ the system e.g. instead of placing stop or limit orders she started going in at market because ‘I’m sure the price is going to get there’ she said. Needless to say the price NEVER ‘got there’ and reversed and, of course, the end results were ‘less than stellar’. I’ve also watched her ‘double up’ on positions because they ‘looked good’ and then started having to close come positions at a loss to avoid margin calls etc. etc. etc. and all of this happening while I’m phsycally standing there giving very clear instructions on what to do i.e. sort of like ‘paint by number’. And I know it’s not my instructions that are at fault for the simple reason that I am trading another three accounts with EXACTLY the same system and orders and making a profit on those three. I’ve also watched her holding on to a losing position because the loss was too great to just simply ‘write it off’ and ‘it’ll get better if I wait won’t it’ type of thing. I’ve also watched her get ‘angry’ when having to eventually realise this loss (and again: this is a person who really is nowhere NEAR as devoted to ‘money’ as I am). Now don’t get me wrong: I personally think that she’ll become a great trader in a very much shorter space of time than most but it was just very interesting to see how the market ‘equalizes’ us i.e we’re ALL susceptible to the ‘fear and greed’ phenomenon (not to mention the ‘patience’ phenomenon) and it’s only when you’ve learned to ‘quell’ and ‘control’ these emotions that you stand an even REMOTE chance of being succesful in this business.

There’s your (my) ‘thought for the day’!!!

2176

Hey Dale, I was just wondering if you ever figured out that problem with the CSI, something to do with the inconsistencies of the charts. I went back and checked and the figures for adx and atr that I gave from oanda’s charts on feb 7 for gbp/jpy were the same today, so in other words my data didn’t “change”.

2177

Dale,

I’d just like to say a big thanks to you for havint the energy to keep this thread going. Depsite the fact it has drifted from PSAR, it is an incredible read. Everytime I come back from a job, I do my best to catch up with this.

I’m interested in the Wilder book you mention “New Concepts” but I still have a host of material to get through that I promised myself I would read before I bought any more.

But anyway mate, I’m glad you’re back into the groove again and doing well, and this thread has been and still is a huge inspiration for me.

All the best
Boca

2178

Hi Boca,

Nice to see YOU here again (the thread’s gone very quiet of late and I don’t see any of our ‘old mates’ around any more either). Anyway, it’s a pleasure (keeping the thread ‘up to date’) (and it’s a ‘whole lot easier’ to do now that I’ve got my ADSL back)!!!

Yup, I’m doing OK now i.e. I’ve think I’ve learned a lot and I have spent many, many, many hours getting to know Wilder’s systems and indicators ‘inside and out’ and they are working for me. It’ll be a long time before I recover last years losses but hey: I’m still ‘in the game’ and still as dedicated as ever to this business after all that and that’s what counts (to me anyway)!!! If you do decide to buy the book (which I OBVIOUSLY HIGHLY recommend that you do) remember that I arranged for them to give any babypips.com members a discount so be sure to email me for the code if you decide to purchase it. I’ll tell you this much though: it’s ‘worth it’s weight in Gold’ to me!!!

chirules54:

Thanks for reminding me. I actually forgot to check. The good news is that my values have also stayed the same. I may have ‘misled’ some with my ‘rantings and ravings’ about indicator value changing etc. etc. etc. What I SHOULD have mentioned is that the ‘changing values issue’ would only occur when an indicator is using the ENTIRE range of bars available to it at any given time to perform a calculation and would not affect the value of indicators that are only using, for example, 14 periods of historical data, or something like that. Like the ASI for instance: the ASI is the sum of ALL of the SI’s on the chart so if the very first bar in the chart ‘drops off’ then the ASI sum will differ every day by that amount i.e. it’s not using the same values every day and then just adding on the new days value i.e. it’s dropping off the oldest value and then adding the new days value so of course it’s going to be different every day UNLESS compensated for. ATR on the other hand is the average of the previous 14 days worth of TR data (or 7 or whatever you decide to use) so it’s value would not be affected (unless of course you went back in time on the chart i.e. the ATR for the very first couple of bars on the chart would change every day as the oldest bar drops off). I hope that this explains what I was trying to say in more detail.

Anway, I’m glad I checked i.e. one can never be too sure. Suffice to say that all my values have remained constant (including the CSI) so I’m very happy about that needless to say!!!