Parabolic SAR - that's all!

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403

Good morning,

Thanks for posting you thoughts on interest rates Akram and Alan.

To be honest - I’m not quite sure that I understand this whole thing of interest rates and what their long term effect is on a currency pair. All I DO know is that when a country raises their interest rates that country’s currency strengthens AT THE TIME OF THE INTEREST RATE ANNOUNCEMENT. What happens AFTER that I’ve never bothered to follow or analyse so I don’t know if that’s why it appears that we are talking ‘at cross purposes’ to each other.

From what I have learned / heard / seen in the past couple of months is that there are certain currencies that are extremely sensistive to interest rate changes and those are the USD, JPY, CHF, and EUR.

Why these currencies?

Because I’m led to believe that they are used for the ‘carry trade’ e.g. investors will borrow money in Japan at a very low interest rate and invest it in the USA (for example) where interest rates are much higher and, obviously, their profit is made from the difference between the interest earned on their investments in the USA and the interest paid on their loans taken out in Japan. Now - think about it logically - if Japan RAISES interest rates - then the interest rate differential between the USA and Japan narrows i.e. the profits to be made because of the interest rate differential between the two countries are now reduced. So - in the case of the USD - if the US lowers interest rates (which I for one am really hoping that they don’t) - then the USD will weaken against the JPY SO - in this case - on that day - you would want to be short USD/JPY (or rather short USD/??? BUT long ???/USD). What happens after that i.e. in the longer term I do not know. What I have also noticed of late is that these huge ‘interest rate spikes’ of late are not so pronounced of late i.e. when I first started out and, let’s say the BOE raised interest rates, the GBP/??? would ‘spike’ up ‘to the moon’ (and then come slowly down again - that’ trading the news) BUT lately - whenever there has been an interest rate announcement - the ‘spike’ has not been nearly so pronounced. From what I gather it is because investors / traders have already ‘priced in’ the expected interest rate change.

I’ll tell you that it is something that has always confused me (especially in the beginning). I mean - logically speaking - one would ‘think’ that the lower the interest rates - the better for the country i.e. lower interest rates - people pay less for their homes on a monthly basis or motor vehicles and spend more and life is good for ‘non traders’ - but - from what I have seen - this is somehow not the case from a ‘forex’ point of view.

As I type this message - I find myself asking the question: "Are currencies used for the ‘carry trade’ affected differently by interest rate changes than currencies not used in the ‘carry trade’’’? Maybe that’s where the confusion is coming from.

Tell you what - I’m going to send a PM to John Forman (‘rhodytrader’) and ask him to take a look at these last few messages which relate to interest rates and ask him if he would not mind giving us some input on the subject (if there is ANYONE that can clarify these issues it will be him).

Regards,

Dale.

404

By the way - I found this article (a link from the calendar at Forex Factory) - regarding the CHF and what ‘might’ happen today:

Preview � Brave SNB Expected to Hike Rates

I’m not sure if it will make you ‘feel’ better or not - at this point it appears that we simply don’t know what they (the Swiss) are going to do today but - here’s hoping!!!

Regards,

Dale.

405

I know u guys might be waiting for the book i am sorry for not posting it latter as my DSL wasn’t working properly.

So i am attaching 2 pic one for the intrest rate the other for the book name and the writer name and what he do!!

Now i can say in forex low intrest rate means good for the currency it will go up and the vise versa have alook and check it and also the biggiest impact always happen when somthing unexpected is happing

406

[QUOTE=dpaterso;21772]Good morning,

Thanks for posting you thoughts on interest rates Akram and Alan.

To be honest - I’m not quite sure that I understand this whole thing of interest rates and what their long term effect is on a currency pair. All I DO know is that when a country raises their interest rates that country’s currency strengthens AT THE TIME OF THE INTEREST RATE ANNOUNCEMENT. What happens AFTER that I’ve never bothered to follow or analyse so I don’t know if that’s why it appears that we are talking ‘at cross purposes’ to each other.

Well Dale,

What i was saying is concerning the intrest rate was about forex and there emmediate reflect on the market any ways i think we should invastegate it more deeply coz yes it is very important we have to know it coz it give us the feel for how things is going to go.

Akram

407

Hello People,

Sorry I’ve been absent for a while. Had go out of town for work. I just now got caught up on the thread. You guys have been pretty busy.

Dale, what kind of moving average did you use to calculate your ‘almost’ alligator on Delta? I mean, should I use the simple MA or exponential MA? Oh and how exactly did you calculate it? I noticed that Delta uses the close price for calculating MAs and I don’t know how to change it.

Forgive me for pestering you with all these Delta questions but fortunately or unfortunately, you have the honour of being my resident Delta platform mentor.:smiley:

Thanks.

Joan

408

Normally I don’t get involved trading system discussions, but Dale asked me to chime in on the interest rate discussion.

All other things being equal or held the same, an increase in a country’s interest rates will be a positive for its currency. If it happens unexpectedly - a surprise rate move - the market will normally rally that currency. If the move was expected, generally the market reaction will be muted and potentially even faded. All of this would be flipped around for a rate decrease, of course.

That said, rates are not isolated things. You have to consider the underlying reason for rate changes. For example, if rates are rising because of rising inflation, that’s not going to be a positive for a currency.

Also, falling interest rates are often indicators of economic weakness in a country, which makes the whole currency depreciation that much more.

Keep in mind that in the big picture there are two supply/demand drivers of exchange rates. One is trade. The other is capital flows.

409

did u guys see the book ???Dale u saw the book?I guess u have a hard time now ?

Akram

410

Hello,

Akram: what book? I don’t see any attachments or anything like that.

As far as trading is concerned - yup - I’m having a VERY bad time right now!!!

I ended up closing ALL of my positions on anything AUD/CAD/NZD and took a HUGE LOSS on these positions.

Now - I know what you’re all thinking - ‘See - even HE can’t stick with the indicator’!!!

Now - while I ordinarily would agree with you - this time it was done for a GOOD reason - not just on a ‘whim’!!!

As you know - I’ve been questioning the ‘validity’ of including the ‘commdolls’ in this ‘strategy’ and - I’ve come to the conclusion - that EITHER - you exclude them altogether - OR - you only take positions on them IF the direction being indicated by Parabolic SAR is correctly ‘correlated’ with the relevant commodity.

In other words:

If the ‘Parabolic SAR direction’ of Gold is up - then you buy or go long AUD/???, NZD/???, and ZAR/??? and you sell or go short ???/AUD, ???/NZD, and ???/ZAR.

If the ‘Parabolic SAR direction’ of Gold is down - then you sell or go short AUD/???, NZD/???, and ZAR/??? and you buy or go long ???/AUD, ???/NZD, and ???/ZAR.

If the ‘Parabolic SAR direction’ of Oil is up - then you buy or go long CAD/??? and you sell or go short ???/CAD.

If the ‘Parabolic SAR direction’ of Oil is down - then you sell or go short CAD/??? and you buy or go long ???/CAD.

I’m undecided in the case of pairs like AUD/CAD, AUD/NZD, NZD/CAD, etc. etc. i.e. where the ‘commdolls’ cross so any input would be GREATLY appreciated.

Before opening any of the above positions you still have to wait for a valid Parabolic SAR entry signal on the pair and a ‘valid’ signal will only be one that is in the ‘correspondingly correctly correlated direction’ of Parabolic SAR on the commodity (metal).

That’s quite a mouthful!!! Make sense???

Now - that’s the reason that I closed all of these positions i.e. Gold - although the rally ‘looks’ like it’s run out of steam it has not yet turned according to Parabolic SAR - and the same applies to Crude Oil - and - what has been happening the whole day (since opening these positions in fact) - is that these positions were ALL taken in the wrong direction i.e. false Parabolic SAR entry signals so waiting it out on these positions just for the sake of ‘sticking’ with the indicator was really futile i.e. the loss was inevitable - it was just a case of how big the loss was going to be at the end.

Now you may say ‘well - it should not really matter - as long as you took the signal from Parabolic SAR in the correct direction - then the movement of the pair should still continue as if the pair was moving just like any other pair’. Well - from what I can see - not so. The movement of the other pairs happens because of ‘normal’ factors (for want of a better description) and ‘influences’ such as interest rates, supply and demand, that kind of thing. With the ‘commdolls’ though - because there is a high correlation percentage between them and Gold and Oil - it would appear that the correlation ‘overpowers’ (again for want of a better description) the ‘normal’ factors and ‘influences’ that would affect any other currency pair. In other words - yes the AUD would be affected by interest rate changes in Australia (as one example) but the influence on the AUD of the Gold price is greater - if you know what I mean.

I hope that all makes sense - and I REALLY hope that if I’m posting ‘s**t’ here that somebody will correct me (by the way - at least I think I was right about CHF today).

Because of the above factors - I wrote off a LOT of money today - but it’s still less than it would have been had I just waited it out. I’m confident - that WHEN Gold and Oil DO turn around for real - I’ll make up the losses and then some on the ‘commdolls’ if I stick to the above ‘strategy’. Of COURSE the possibility exists that Gold and Oil will continue on up ‘like there is no tomorrow’ and all of the positions that I closed today would have turned into a profit before being reversed - and then I’m going to find another way of making a living!!!

Jean:

I have attached a self-extracting WinZip file. Download it and run it (by double clicking on it - and don’t worry - I guarantee it’s virus free) and just accept all the default prompts. Then - when you’re on a chart - ‘Add/Remove overlay indicators’, select the ‘More’ button, move right down the menu until you see the folder ‘Native’, click on the plus sign to the left of ‘Native’, and right at the bottom you will see an indicator called ‘AMA(Bill Williams’ Alligator MA’s). Click on this and - hey presto - you now have an Alligator on your chart (well it’s not a ‘true’ Alligator because it is not ‘shifted’ a couple of bars ahead because I don’t know how to do this - yet - but it is nevertheless the same MA’s as per Bill Williams books i.e. he does not say whether they should be simple, exponential, smoothed, etc. etc.). They (the MA’s) that I used are just simple MA’s - but I see that on Metatrader 4 the Alligator consists of ‘smoothed’ MA’s - but from what I can see - there is no ‘real’ difference i.e. if you change the MA’s from ‘smoothed’ to ‘simple’ on Metatrader 4 there is such a slight difference in there appearance that I can’t see how it would matter.

ONLY EXTRACT THE FILE THAT I HAVE GIVEN YOU IF YOU HAVE NOT MADE ANY CHANGES TO OR ADDED TO THE FORMULAS ON DELTA’S PLATFORM BECAUSE MY FILE WILL OVERWRITE ANYTHING THAT YOU HAVE ADDED OR CHANGED.

ALSO - YOU HAVE TO RENAME THE FILE FROM ALLIGATOR.ZIP TO ALLIGATOR.EXE IN ORDER TO RUN IT (you can’t upload executable files to the forum).

If you HAVE added your own formulas or changed stuff there then I’ll somehow have to give you instructions on how to create the thing yourself.

Regards,

Dale.

411

By the way - here are the two pages that Akram wanted to upload.

(You could not upload them because when you scanned them you scanned them at too high a resolution i.e. they were to big to upload).

Makes for some interesting reading (and does not look like a bad book to have - maybe I should go into the publishing business instead)!!!

Regards,

Dale.

page1.jpg456×700 237 KB

page2.jpg453×700 259 KB

412

Another ‘by the way’!!!

I have just got to tell you all that I’m feeling extremely despondent right about now - about this ‘system’ and everything.

I mean - I am battling to understand how - in the space of a month or so - I managed to make a 114% capital gain - and now - since the beginning of this month - have pretty much taken loss after loss after loss. I mean - I’m not doing anything different here - so what’s changed???

This is EXACTLY what I was afraid of (last month) i.e. was this just ‘luck’ i.e. being in the right ‘Parabolic SAR place’ at the right time last month??? Is it because I am not following my own advice and seeing the trades through no matter what??? What is it???

I mean - I find myself looking at each and every chart - all day - looking for reasons WHY this was a good trade and WHY that was a bad trade and WHY WHY WHY!!! It’s driving me nuts!!!

I can look at a chart of any of the 44 pairs and say ‘well - that was a good place to enter because . . .’ or ‘there was no conceivable reason for me to not take that trade’ and the trade has turned bad. Then I can look at another chart and the reasons for NOT taking that trade (based on Parabolic SAR and MACD and Akram’s ‘Alligator’ and, and and, . . .) are absolutely SCREAMING at me - and yet - somehow - that trade managed to turn a HUGE profit in some cases.

Then I find myself thinking ‘this is why I lost interest in forex trading in the first place’ i.e. trading the Indices is a whole different world from trading forex pairs.

Then I find myself thinking ‘but hang on - you started this all - it was an ‘experiment’ at first - which just happened to pay off BIG TIME from the ‘get go’ - so what now’???

I mean - here I thought I’d be winning Delta’s competition this month!!! At the moment I’m feeling like I’ll be lucky to have an account LEFT let alone winning the competition!!!

Maybe I’m just tired (I do know from past experience that when I get like this the best thing to do is take whatever profit / loss is ‘on the table’ and walk away - because otherwise - I get into this ‘I WILL find a profitable trade even when I don’t see one in front of me’ mood - and - needless to say - this has ALWAYS turned to disaster). Not only that - but then I would AGAIN - be going against everything I’ve said in this thread!!!

I mean - although I’m still ‘up’ on this account - because of my ‘windfall’ last month . . . Actually - that’s the problem i.e. I need to know or be able to prove that last months ‘action’ was NOT a windfall!!!

That’s the problem with this business (for me anyway) i.e. the ‘highs’ are ‘HIGHS’ (when you’re making a profit) but the ‘lows’ are ‘REALLY LOW’ when you’re not making money i.e. the ‘lows’ are not ‘proportionate’ to the ‘highs’!!!

Now I’m leaning on you guys - sorry - but I need a ‘reality check’ or a ‘pep talk’ or something like that!!!

I don’t mean to depress you - I know it’ll pass.

Why am I telling you all of this anyway!!!

Regards,

Dale.

413

Rhodytrader

Thank you for taking the time to explain that to us so clearly. Is there another thread where such things are discussed further?

I did really enjoy the clarity of your explanation.

With best wishes

Ingot

414

Hi Dale,
This month has been very hard for trade.Lots of systems failed.So don’t worry.We are all in the same boat.
regards
Mike

415

Dale,

stop beeing down please for god sack!!

Well i think Dale u open lots of postions like last month and it seems that the history is not always the same.There has to be some slightly changes after every move in the market and then it goes back to normal.

I think the strategy is perfect our main problem is that we can’t predict if the market is going on trends or not this is our main issue here.

coz in trendy days when u use the pure PSAR what happen is that u gain alot when the market moves in sideways u will lose both ways!!! As u will never be able to make money

I was just trying to apply some indicators to check for any possible trends with the past trading days.to be able to know more about this crazy market how it moves.but i am still working on that

Dale or any one who follow Dale i think guys there is no system that can produce money 100% all the time.all what we need to do right now is to stop trading for a while and try to think why Dale made good money last month and why he is lossing now but i think it is still too late to do that now as the month is still away to be finished we may do that latter by the end of this month who knows Dale u might make good money this month too and all what u are saying about lossing is going to be changed (who knows).

I don’t want u guys to be down from what Dale is saying as we still need to know lots of stuff .

Any thoughts?

Akram

416

I know there are discussions in other places, but I can’t think of a specific thread dedicated to the subject. Might be wrong, though.

417

Quote: I have just got to tell you all that I’m feeling extremely despondent right about now - about this ‘system’ and everything.

I mean - I am battling to understand how - in the space of a month or so - I managed to make a 114% capital gain - and now - since the beginning of this month - have pretty much taken loss after loss after loss. I mean - I’m not doing anything different here - so what’s changed???

This is EXACTLY what I was afraid of (last month) i.e. was this just ‘luck’ i.e. being in the right ‘Parabolic SAR place’ at the right time last month??? Is it because I am not following my own advice and seeing the trades through no matter what??? What is it???

I can look at a chart of any of the 44 pairs and say ‘well - that was a good place to enter because . . .’ or ‘there was no conceivable reason for me to not take that trade’ and the trade has turned bad.

Then I find myself thinking ‘this is why I lost interest in forex trading in the first place’ i.e. trading the Indices is a whole different world from trading forex pairs.

Then I find myself thinking ‘but hang on - you started this all - it was an ‘experiment’ at first - which just happened to pay off BIG TIME from the ‘get go’ - so what now’???

I mean - here I thought I’d be winning Delta’s competition this month!!! At the moment I’m feeling like I’ll be lucky to have an account LEFT let alone winning the competition!!!

Now I’m leaning on you guys - sorry - but I need a ‘reality check’ or a ‘pep talk’ or something like that!!!

I don’t mean to depress you - I know it’ll pass.

Regards,

Dale.
Unquote.

Hi Dale

Yes mate, it WILL pass. Remember it was you who first thought of this approach, and showed us a different way of trading. I came along a little bit late, but still in time to witness the excitement of the birth of the idea.

I want to say to you … “The sun will rise tomorrow.” And indeed, “This too shall pass.”

You have already demonstrated that you have the bones of an excellent trading setup here - so pure and so simple. All you have discovered is that the PSAR does not work in non-trending markets. That … we knew.

And just now, the markets are not trending nicely - yes, in one TF or another they always ARE trending, but just not in your chosen TF. Whipsawing DESTROYS systems.

So … now we know what the problem is, let’s solve it mate.

“There is a time to buy, a time to sell, and a time to go a-fishing!”

Who said that? Why, none other than one of the greats, Jesse Livermore.

If the market is not playing, don’t bother it… have a break. You have 44 pairs to follow - that is too many, but just my view. My feeling is that it is far better to concentratye on no more than 6 pairs, and maybe only three. But … make sure you know the colour of their jocks! ie: If you know your pairs’ characteristics, you can meet them at the corner a long time before they are due to arrive! (Hope you can understand the analogy!)

What I am saying is this … you can not force a trade that s not there.

I think your basics are sound, but you DO need a trend indicator like ADX (DMI+ DMI-).

Most of the very good systems use no more than three indicators, and I think you can crack this with just the two - PSAR and ADX.

Keep in mind that the ADX is not actually used to trade with, it is just a filter to tell you when PSAR is “firing” or in its element. Right now, your disappointing trades are telling you what the ADX would have told you earlier.

Above all Dale, do not give up.

Step back, have a think, regroup, and continue to believe in this. You have had some excellent exchanges on your thread, and people like myself are immensely enjoying your development of your idea. I want to encourage you to work this through - you will come out the other side a stronger and much more successful trader … and so will your reading public.

And remember mate, I want to see you in Oz for that beer next year.

With best wishes

Ingot.

418

If it was that easy, everybody would be doing it… HANG IN THERE Mate!

I have taken this all in - Indicators, news, etc.
and what i found is you still need a gut feeling on this stuff
sometimes it is like flipping a coin…I know all the guys out there with all there systems are probably Laughing right now!, but if you think about it … you can never TRULY predict which way it will go.

I live in the USofA and i been doing pretty good trading GBP/USD - EUR/USD and USD/JPY …our economy is crap right now…so the trend is to go long with GBP and EUR and it has been working…

To sum it up:
i think (FOR ME ANYWAY) picking only 2 or 3 of the same currencies and only trading those, then you can almost see the TRENDS develop from one day to the next…

the only thing i know is that i have been live Trading for over a month, started with a small 1000.00 account, now my account is over 1300.00…so what ever i am doing it must be working…

Let’s test my theory, RETAIL NEWS USA will come out tomorrow, THEY say will be good, I bet that If You SHORT EUR/USD you should see a Trend, the dollar has been getting BEAT UP lately, this news should help…If it is BAD NEWS, all bets are off

Sorry, just wanted to share my experience,
I was frustrated in DEMO WORLD, now LIVE is much more peaceful

419

Yeh, yeh, yeh - I’m still here!!!

Ingot54:

Man I appreciate your words - you know - sometimes you just need to hear something positive - especially when you have been starting at screens the whole day and nothing is happening - thanks!!!

I know that the BIG problem here is that this starting to take it’s toll on me ‘rest’ wise i.e. when I was JUST concentrating on the Indices it was simple - up at 06h00 SA time (after a good nights sleep) - do what I had to do and check what I had to check - no problem - but since starting this thread - I’m STILL up at 06h00 BUT I cannot go to bed before 00h00 - as this is when Delta’s daily charts get updated and - by the time I’ve gone through my daily checklist / worksheet for all 44 pairs - and then checked the thread - and then ‘just checked one or two other things’ - it’s about 02h00 when I’m done. Now I know that there are people that actually thrive on 4 hours sleep a night - I’m not one of them!!!

Anyway - enough about my personal problems!!!

Ingot54 - you mention ADX. Have you used ADX? What do you think? The reason I ask this is that I have touched on this before and I just can’t for the life of me figure out how it is a help in keeping you out of bad trades and ensure that you take the good ones only (or at least the ones with the highest probablility of making a profit).

As a matter of fact I seem to remember posting some charts demonstrating the problems that I have with ADX i.e. from what I could see it kept you out of some EXTREMELY profitable trades i.e. you would not have opened the position if you were looking to ADX for confirmation AND sometimes it also gave a very clear signal to actually open a position when you should not even have been thinking about taking that particular trade and - from my ‘scrutiny’ - this seemed to happen more often than not.

Now strangely enough - as you know - I have the book - and I have read and re-read this section (on ADX and ADXR and DMI) and although it appears to work ‘like a charm’ in the examples given in the book - I just cannot seem to get it to ‘perform’ the same way in ‘real life’!!! I STILL think that maybe I’m just not understanding it correctly - but believe you me - I have sat for hours going over this chapter - time after time - and then trying to relate it to my live charts - and I just don’t seem to get IT!!!

Anyway - if you have some input on this - I’d appreciate it.

Regards,

Dale.

420

Actually - thanks to EVERYONE for their concern and kind words - it’s really very much appreciated!!!

Regards,

Dale.

421

Hey friedn i think u r back on track now arent u???

GBP/CHF is bomming man it is 100 pips gain!!!

check it out don’t tell me u closed it Today!!!

Have fun

Akram

422

Dale,

concering the rollover do we normaly pay a rollover over the week end i mean if u open a position on friday and u keep on opening it till next monday do u pay a rollover for sat and sun???

Regards,

Akram Mohsen