Parabolic SAR - that's all!

[jomni]

I tested this today on gbd/usd, using a demo account and a 1 minute chart.
I had 4 wins in a row within 2 hrs for a total profit of $4700. I entered a long or short at every reversal of the dots. Beginners luck?

That’s because the recent market is trending due to the turmoil in the US. Let’s see how the system does in a sideways market. I believe filters are really necessary to improve your odds.

[terrya64]

Still running this on 1 minute chart, PSAR only.
Results this week.

17 mar:
gbp/usd short +120
gbp/usd long + 70
gbp/usd short +32
gbp/usd long +250

18 mar
eur/usd long +222
nzd/usd short +30
nzd/usd long +120

19 mar
gbp/usd long +67
gbp/usd short +28

That’s it for now. I have used a few different pairs, I try to find the pair that has the biggest trends at the time I am able to trade. All these trades have been from about 5:30-7:00pm central time.The reason for the small gains on the 19th, the charts just didn’t have the movement I like to see. Have enjoyed reading this thread so far. Plan on using some of the other indicators at a future time. but for now I will just let it ride PSAR only.

[ozzy007]

Geez: I was worried that this thread would ‘die’ but it seems (happily) that this is not going to be the case.

Right: here is a ‘system’ (for all you ‘stunningly lazy’ people that don’t want to ‘put in the slog’ and want to ‘get rich quick’) based on Parabolic SAR using Fractals:

(By the way: this ‘system’ is SO good that I’m going to ‘copyright’ and ‘patent’ it so be sure to give credit to me when posting this somewhere else otherwise I WILL find you and kill you)!!!

(As you can no doubt gather I get bored while Mr Wilder’s ‘Swing Index System’ makes me a ‘gazillionaire’ so I have to keep my mind occupied and then I come up with ‘gems’ like this)!!!

Right: here we go!!!

After OVER A YEAR of ‘studying’ and ‘analysing’ Parabolic SAR (and a ‘couple of K losses’ to ‘boot’) I (we???) all know that the MAJOR drawbacks of using Parabolic SAR are ‘encapsulated’ in the following paragraph:

Parabolic SAR is ‘taboo’ in a ranging market and the (sometimes) potential losses are HUGE if the trade goes against you and you’re using Parabolic SAR to set your stop losses (as per it’s original ‘design’).

SO: What would you say if I told you that I have the solution (finally)???

Check this out:

You need:

Parabolic SAR (default settings i.e. don’t ‘mess’ with it)
Fractals (default setting which is normally 5)

Procedure:

Watch the chart closely.
Watch some more.
Have another good look at the chart.
Wait for a Fractal to appear.
If an ‘up’ Fractal appears then wait for another bar to CLOSE above the high of the bar where the (last) ‘up’ Fractal appeared or, if a ‘down’ Fractal appears, then wait for another bar to CLOSE below the low of the bar where the (last) ‘down’ Fractal appeared (and we will call this bar the ‘signal bar’).
Ensure that the direction of Parabolic SAR at this point is going IN THE SAME DIRECTION as the ‘signal bar’.
Place a stop order ‘a couple of ticks’ above the high of the ‘signal bar’ for a long entry and place a stop order ‘a couple of ticks’ below the low of the ‘signal bar’ for a short entry.
Your INITIAL stop loss is ‘a couple of ticks’ below the low of the bar where the PREVIOUS ‘down’ Fractal has appeared (that is the PREVIOUS ‘opposing’ ‘down’ Fractal) for a long entry and your INITIAL stop loss is ‘a couple of ticks’ above the high of the bar where the PREVIOUS ‘up’ Fractal has appeared (that is the PREVIOUS ‘opposing’ ‘up’ Fractal).
Your stop loss STAYS here (there) UNTIL Parabolic SAR has ‘taken over’ i.e. has ‘locked in’ profits OR is a closer stop than the INITIAL stop as detailed above.

THAT’S IT!!! (It’s so simple that even a ‘novice’ can trade with it)!!!

Take a look at the attached chart for a ‘graphical’ explanation.

To be serious now:

Why does this work? Reason: because Fractals signal ‘key’ turning points on a chart AS WELL AS support and resistance. What you’re looking for in these trades is a Parabolic SAR trade where the price has broken through support or resistance IN THE SAME DIRECTION as Parabolic SAR.

Have fun!!!

(By the way: from what I can see this works on ANY timeframe and, ironically, appears to be more profitable on shorter timeframes i.e. shorter than the daily timeframe).

I have 2 fractals pointing down…psar is going down…so i am shorting…in between the 2 down fractals i have a fractal pointing up…the most recent fractal had lower lows than the first fractal pointing down…my stop loss will be the high of the previous bar where fractal is pointing down and not the previous high of the bar on the most recent fractal right? I’m confused which fractal on which bar i use for stop loss.

[dpdawson]

Still running this on 1 minute chart, PSAR only.
Results this week.

17 mar:
gbp/usd short +120
gbp/usd long + 70
gbp/usd short +32
gbp/usd long +250

18 mar
eur/usd long +222
nzd/usd short +30
nzd/usd long +120

19 mar
gbp/usd long +67
gbp/usd short +28

That’s it for now. I have used a few different pairs, I try to find the pair that has the biggest trends at the time I am able to trade. All these trades have been from about 5:30-7:00pm central time.The reason for the small gains on the 19th, the charts just didn’t have the movement I like to see. Have enjoyed reading this thread so far. Plan on using some of the other indicators at a future time. but for now I will just let it ride PSAR only.

When were these trades?

I don’t see any moves on the Mar. 17, 1 min, GBP/USD chart that went for 120 or 250 pips, I don’t see a 222 pip move on the Mar. 18, 1 min, EUR/USD chart, and I don’t see any 120 pip moves on the Mar. 18, 1 min, NZD/USD chart.

[terrya64]

These are the days that I closed the positions, some were opened a day or 2
before in a couple of cases. Most are opened and closed within about 2 hours. I used the PSAR indicator to enter the trade short or long and then used my best judgement as to when to get out. If I was happy with the profit I pulled the plug.

I will post results for last nights trades when I get home from work in a few hours. Thanks…

[terrya64]

When were these trades?

I don’t see any moves on the Mar. 17, 1 min, GBP/USD chart that went for 120 or 250 pips, I don’t see a 222 pip move on the Mar. 18, 1 min, EUR/USD chart, and I don’t see any 120 pip moves on the Mar. 18, 1 min, NZD/USD chart.

Thanks for catching my screw up. I have been posting $ profit/loss instead of pips.

I will post pips in the future. Still new to all this.Sorry

actual pips gained since Mar 17th across all trades 1049.

Got my first 2 losses on the 20th.
eur/chf for (165).
gbp/usd for (155) for $320.00 . These losses were not due to the PSAR, I ignored what it was telling me and tried anyway. I did find promissing indicators on the usd/jpy and eur/gbp a little while later and did end up with a $5674.42, 370pips gain for for the day. Lesson learned.

Started this demo account on March 14th with $50,000 and have brought it up to $84,185 so far. Will spend this weekend continuing to study the babypip lessons. Up to 5th grade so far.

[dpaterso]

Hey folks,

Nice to see some new people here. Welcome.

Sorry: I neglect this thread from time to time (because of the other one).

I’m particularly glad to see that people are using Parabolic SAR successfully and if it ‘suits’ your ‘trading personality’ then you cant’ go wrong with it over time.

Be warned that it will KILL you in a ranging market though. Just be aware of that. I’m ‘sorta hoping’ that my ‘fractal idea’ will alleviate some of the ‘pain’ though i.e. only get you into a trade once support or resistance has been broken.

So far it’s the best I have come up with (for Parabolic SAR anyway).

Using Bill Williams’ AO and AC is also a good way to ‘confirm’ trades I reckon. I suppose you COULD add them AND fractals BUT just don’t complicate things too much for yourself because if you start missing what COULD have been some very good trades because ALL THREE of the indicators did not ‘concur’ then you’re going to get impatient and start ‘second guessing’ and ‘jumping in’ and that will wipe you out a LOT faster than the odd loss due to a bad trade based on Parabolic SAR!!!

[leonharvard]

Dale, the Fractals thing looks like a great combination for PSAR. However, I need a more comprehensive guide on implementing it.

I’ve been reading it many times for a few days now, and I’m still confuse. I’m just afraid I’m applying it the wrong way. Care to write?

Thanks Dale

Leon

[dpaterso]

Hey Leon,

Again: sorry I’ve taken so long to respond i.e. I don’t check this thread much anymore.

Anyway: I’ve attached a chart and detailed on the chart what I’m getting at. I hope it makes sense.

Basically what APPEARS to happen (I do NOT trade this i.e. again just an idea for someone to work on) is that waiting for a close above or below the previous Fractal and only THEN placing an order to go long or short it keeps you out of those ‘bad’ Parabolic SAR trades and ESPECIALLY when the instrument is stuck in a range which is where Parabolic SAR ‘falls down’. Yes you DO miss some profit sometimes and yes you WILL miss some good trades BUT this SHOULD negate your losses as well so everything should be equal at the end of the day.

Hope the chart helps.

Feel free to ask if it does not.

[rtame]

Hey Leon,

Again: sorry I’ve taken so long to respond i.e. I don’t check this thread much anymore.

Anyway: I’ve attached a chart and detailed on the chart what I’m getting at. I hope it makes sense.

Basically what APPEARS to happen (I do NOT trade this i.e. again just an idea for someone to work on) is that waiting for a close above or below the previous Fractal and only THEN placing an order to go long or short it keeps you out of those ‘bad’ Parabolic SAR trades and ESPECIALLY when the instrument is stuck in a range which is where Parabolic SAR ‘falls down’. Yes you DO miss some profit sometimes and yes you WILL miss some good trades BUT this SHOULD negate your losses as well so everything should be equal at the end of the day.

Hope the chart helps.

Feel free to ask if it does not.

Hi Dale
Could you please tell me which other forums can I find you
Thanks
Ricardo

[dpaterso]

Hello Ricardo,

It is HERE:

http://forums.babypips.com/free-forex-trading-systems/10766-trading-systems-new-concepts-technical-trading-systems-j-welles-wilder-20.html

where I can mostly be ‘found’!!!

Or you can ‘YM’ me (Yahoo Messenger i.e. my new ‘toy’)!!!

[Anton]

A couple of newbie questions…
The trade is entered when the first SAR dot appears on the daily. At about what time does this occur? Also, does the first dot appear simultaneously with the new candle?
Thanks for the feedback.
Anton

[forex_maniac]

A couple of newbie questions…
The trade is entered when the first SAR dot appears on the daily. At about what time does this occur? Also, does the first dot appear simultaneously with the new candle?
Thanks for the feedback.
Anton

I would say 12am GMT.

[dpaterso]

Already answered this question because it was asked in several other threads AND I’m only answering it here AGAIN because the above answer is INCORRECT and any new trader following this thread will be ill informed.

A new Parabolic SAR ‘dot’ is displayed at the open of a new candlestick or bar and if you’re trading on the daily charts this new candlestick or bar will appear at 00h00 MIDNIGHT AT YOUR BROKER’S TIME!!!

(This is another GOOD reason everyone to NOT double post just because you don’t get an answer to your questios IMMEDIATELY)!!!

[cfabian]

Well, all I can say is that so far I’ve been blown away by this system. I’m in the 4th week of testing now. As I stated before, I started off with only $1200 in my account, and am now at $6921. Of course it’s early days yet, but I’m quietly optimistic. I’m posting the results on my website on as regular a basis as I can manage.

Dale, very interesting post about adding the Fractal indicator. As soon as I get some time I’ll start testing that as well. I’ll post the results of both systems on my blog.

Hello mule,
I wonder if you have updated results on this PSAR system? Or what are your insights at this point after 2 months of initial testing?

To Dale and all,
This thread really has very valuable info (thanks for all your time and devotion Dale). After spending several days reading it to catch up, I was wondering what would be the result of using PSAR as an entry point on certain timeframe (say H4), and to avoid late exits, go to timeframe -1 (this case H1) and exit when the PSAR changes direction? I know it will imply to make shorter trades, but probably will add profit probability.

I was also wondering about the results of using this same methodology, but instead of using PSAR, use the Heiken Ashi indicator (go long when initial blue indicator, stop or stop and reverse when turns red)?

Thanks again to all

Best regards,

[frontier2002]

Alright alright - I closed the position. You can all call me a ‘chicken’ if you want.

There was, however, method in my madness:

I had a look at the four hour chart i.e. one timeframe down and I noticed that Wilders’ ADX is starting to move up, and Bill Williams’ AC has two green bars showing already - and that almost always guarantees a trend reversal coming (at least on the Indices). I even added Stochs to be sure and they are also turning up.

Maybe this in itself is a good way of doing things i.e. work on the Daily / Weekly / Monthly charts but once you have opened a position monitor the four hour charts (or one timeframe lower than the one that you are working on) - that way you could get a warning that there is a reversal coming.

Anyway - I’m out (although I’ll leave this same position open at my other broker and see what happens with it. Those are smaller and cheaper lots so if I lose a couple of $$$ it won’t be anywhere near what I have just made).

What I will probably do now is wait and see what happens on the Weekly next week. If the first dot appears when the chart opens on Sunday I will go short again and then monitor the same indicators on the Daily Chart and see what happens.

Now don’t get me wrong - I know this all sounds like I am going against everything I was trying to preach at the beginning of this thread. I’m not. It is just that this trade was a ‘special’ case because of the ‘ferocity’ of the fall. If it were not so ‘violent’ and ‘huge’ I would have stayed in this trade until I was stopped out by a Parabolic SAR dot. Shot dot!

Regards,

Dale.

I am intrigued by the use of Parabolic SAR indicator in trading, i meant i couldn’t understand at all how people is using this thing. Is it more effective than the B. Band, Stochastic, MACD combination?

[isidrohg]

Hi, I don’t want to look lazy, I’m reading this thread but +200 pages is too much :P, sorry if anyone already asked this question.

Does anyone tried SAR settings: Incremental Step = 0.01; Maximum Step = 0.2 ?
If you were using SAR to set your SL, then this settings seems to get you in a trade longer than the default settings, and not stop you early.

Regards

Isidro

[isidrohg]

Hi guys.

I want to share some backtesting I got from FXDD, from 01-01-2007 to 03-28-2008. I used SAR standard settings.

You see, I ran a test on every pair separately (Im not very familiar with MQL). The thing is, if you sum every net profit/loss there IS profit. Maybe not too much I dont know, maybe if we choose the correct lot size, doubling an account can be accomplished in a period of a year very low risk. What you think?

For this test I choose a lot size of 0.01.

By the way, Im not finish reading this thread :S (so many paaageeeeeessss!!!), Im in page 181 I think.

[Dow2]

Hi all,

Just did a back test with MQL4 agaist EURUSD from 2005.01.01 - 2008.04.30, the result is like this.

Profit: -2361 (pips)
Trade: 107
Risk: 368
Win_rate: 32%
Reward: 189

Maybe I didn’t get it right. but here is the trade system’s logic.

RISK: Stop Loss Price = PASR Price
Time Frame: Daily
Entry: Go long or short the moment the first Parabolic SAR dot appears
Exit:The next Parabolic SAR dot appears in the opposite direction.

I am posting the source code here

[scottcap]

Quick question… when using fractals as a filter against sideway action do you count the last fractal if it falls between the SARS dots, or do you only count the last fractal if it is outside the SARS dots.

I am guessing you should only be using those fractals that are outside.

One more thing… do you chase the fractals? If a bar does NOT close above the last fractal (for a long position) but now paints a higher new fractal do you then use wait for a new bar to close above that latest fractal before considering looking for a buy point?