Parabolic SAR - that's all!

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62

There are two reasons that this shouldn’t be a problem, and one way that it DEFINATELY won’t be a problem:

  1. If you are trading inversely related pairs, then the PSAR should be on opposite sides of each pair, and your trades should be placed opposite to each other too. This way you won’t have a hedge, you’ll have two winning positions.

  2. If you find yourself in a hedge, you’d probably find that the PSAR trends will be out of phase with each other. This means that you will have a hedge for a period of time but you will take profits at different times, making both trades profitable ones. this theory would be shot to pieces by a very stong trend. Many people have tried to make EA’s on this principal alone, but they’ll eventually wipe out an account during a stron trend in one direction. As you said “What pair goes up and down and up and down and up and down all day?” Well, none of them will do that forever.

  3. The way to avoit this is by NOT trading inversely related pairs or crosses of two of your existing trades. It would be best to run a long term test on a lot of pairs to determine the most profitable pairs and only trade those. You might end up sticking to 5 pairs or less, but you won’t be over-exposed to the market getting yourself margin called again.

63

I think its very simple daily Parabolic SAR show you very big movement i mean like 300 400 and when price its going down candle going down too it shows main direction!!! 30 minute price is moving much faster it shows you whats movement of the price for the past days i mean going down and up and parabolic SAR shows signals let say between 40 to 200 pips that is the main difference it`s better to use 30m chart!!! it provides you much more signals.
Daily main direction of the chart of the past week 30m of the past days :)))

I`ll very happy if this help you to see what is the difference between this two charts :slight_smile: if i were you i would use 30 minutes chart.because it will give you much more pips. Happy trading

Regards,

Teodosy

64

In continuation of my last post. I know we wonder what are the best time frames to use. I’m back to thinking a daily chart may be the best.

I think the larger the time frame, the more concrete the the trend is, once it materializes. Please see the attached USD-JPY Daily chart.

I said to myself on Thursday when the new parabolic dot formed…“hmmm, a new parabolic dot, but wait, the MACD lines havn’t crossed yet. In fact, not even close to crossing yet. I better wait”

Irregardless of the fact that the NFP data was coming out Friday morning, the correct play still woulda been to wait for the MACD lines to actually cross. THEN go ahead and enter the trade.

I just saved myself a big headache!!! And who knows when this pair will turn around on the daily. But when it does, I’ll be watching for the MACD lines to cross, confirming to myself a new trend is beginning. THEN I’ll go long.

Also, check out my EUR-USD Daily chart. Same deal.

65

New guy here but not real new to trading.

First off, want to thanks Dpaterso and all others for their input on this thread its getting long, and thats great!!! I have read them all. Don’t get discouraged by people asking same questions DP, just tell them to refer to previous posts.

Anyways, I would have to agree with ccox with going with the daily charts for the SAR. Currency has many side steps but the over all trend (best on daily or longer periods) is best, ranging market would be death to this indicator. Only way I could reccomend shorter times frames would be like news trading like today with the NFP, SAR would tell u when the dollar fall is over. But there are many other ways to tell that. I currently use a 7 ema and a 14 sma with historgrams (to make easier to see and has less fake outs) for that kind of trading.

DP, or David, I like ya bud, but I gotta be honest, you are all over the map man…lol I read every thread, you started out sticking with the plan, now your wavering…lol I understand you are looking at other avenues, we all do, but stick to it. Daily ok for SAR, 30 min…DANGEROUS, …MANY fakeouts. ONLY way I would trade with SAR at those time frames is with many other indicators, and I dont really mean indicators, more like price action, candle recoginition, and support and resistance. I am gonna try to attach a chart of why 30 min SAR sucks. you will see how how price action, s and r, and candle recoginition is good for those time frames, not SAR.

If I had to add 1 thing to your sytsem, it would be this. Use MA’s. MA’s are the BEST “indicator” out there. And not as crossovers, as targets and support. I played the indicator game, we all have, I have even paid some damn good money 4 them, and when it comes down to it, MA’s and what I mentioned above beats everything hands down. Trading partner showed me a factoid that said…if u were to trade the dow with a 5 ema I believe, you would have turned 100 bucks into like 16 billion, or something crazy like that, anyways, (over the life of the market) the best indicator out there tested to others. This message is not just 4 you, but others as well.

OK, now my thoughts on the sytem, now I havent tested this a whole bunch, but from what I have seen, lets take GBP/JPY (GY) for instance, for SAR, I would look at the current trend, of daily and weekly, and ONLY trade that way. ANd NOT using SAR as a trend indicator. I use 55 MA, 200MA and 500MA, which works on all times frames, but better the longer time frame. When price is below 55 MA, and parabolic is in buy, thats gonna be the waiting period. Trend says sell, and its wants to buy, and on a daily chart, NOT a good idea. The 55 MA is what the market pays the most attention to, follow by the other 2. Follow the market, don’t chase it. Seems to be alot of losses or very small gains when trading against the weekly trend on daily chart with SAR. So take it as a rest time, trade another pair, and move on. NOT 30 of them…lol No offense.

Also, I know you usually trade other things, but you need to know about correlated pairs, and negativly correlated pairs, plus the news, I seen u mentioned the dead market and didnt know why. That is a bit of a down fall to low maintence trading, though I do like your system, is that you would know that NFP was coming out today, which was a horrible number, as well as a horrible expected number, market slow down for the week b4 news like that. and if it was before then when u made that post, well…lol…the dow dropped 500-600 points and carry trades unwinded, the market was EXHAUSTED…lol I took those 2 days off from trading to take a break, had been waiting for MONTHS for that OP., what r the chances??? O well, hope to catch the run up.

OK, well just my thoughts, will post more when I get to test and look a bit more. Keep up the good work and keep posting, like to hear the updates etc.

BP

66

SORRY, tried to copy charts to a JPG file but dont know how, Crap, more wasted time. Well take my word for ir, string of losses since SAR is a lagging indicator and some signals were against trend. So as they say, the trend is your friend.

I will save this chart and hopefully someone will help. Anyone who has GFT know how? Let me know, thanks

BP

67

I use a 5,12 EMA. And as you can see by the attached chart, its pretty accurate at spotting new trends.

I will only go long on the EUR-USD, once those EMA lines and the MACD cross. Considering the Parabolic dot has already shifted to under the candlestick.

And yes, going long once the above conditions have been met will put me in lockstep with the weekely trend! :wink:

I smell profits next week. :cool:

EUR-USD Daily 5,12 EMA.jpg700×378 31.1 KB

68

I have to concur… and do not try back testing the PSAR on short time frames either… it just does not tell you exactly what happened… That little dot can jump like crazy, giving all kinds of false signals.

If you do use PSAR, use it on long time frames (daily +) and definitely use it in conjunction with something else…

We once had a very “nice” system worked out with the PSAR and when you back tested it worked wonderfull… when you start trading it you will see how those dots can jump from one side to the other. Lagging indicator and you can achieve same / better results for the trend with MA’s.

69

Ok by no means do i want to hijack the original thread. I appreciate what dp is trying to do and i would like to hear more. However if i may please could you please elaborate on the MA’s and how they act as S/R? Also what you would you suggest as a MA on a daily chart? I have always considered MA’s only for people who can’t draw a trend line on a chart, maybe i am wrong.

Also why would you not want to use PSAR to indentify a trend? For a day chart this is a great lagging trend identifying indicator i thouught?

70

Hello everyone!

Thanks for all the messages (especially ‘Big Pippin’) - nice ‘meaty’ thread!!! Thanks.

Well - as you have all probably noticed - I have not posted on this thread for a couple of days. That usually means one of three things:

1 - I’m losing money
2 - I’m too embarassed to admit that my ‘system’ does not work
3 - I’m too hungover from the weekend to care

Actually - in this case - it’s none of the above would you believe - just stocks giving me a ‘royal pain’ now all of a sudden.

As far as Parabolic SAR is concerned - I’m still using it with pretty good results on its own - BUT - I have to be honest - once again - I’ve started looking at other indicators to try and ‘justify’ using Parabolic SAR on its own - if that make any sense at all.

You know what I don’t get with Parabolic SAR though: if you look at historical charts - it does not matter what time frame you look at - it works like a charm (and I mean live charts not demo charts) - many many PIP’s - but the moment you start trading with it - those PIP’s just don’t materialize! Why is that for goodness sake! It just does not make any sense at all!

Anyway - having said that - please don’t worry about hijacking this thread - with anything at all that works!!!

I agree with you all that using indicators is NOT the ideal way to trade. John F. Carter - in his book - actually sums this up quite nicely by basically saying that by the time an indicator gives you a signal - all the other traders and dealers have already acted - you’re just getting in on the tail end (if you’re lucky) OR you’re getting in just in time for the reversal to take you out (that’s my line though)!!!

There is just one thing that I forgot to mention because I did not think that it was important - but since I have been looking into this indicator again - it has become very apparant to me again (I actually did mention this in a thread that I started months ago when I first started trading and everybody thought I was ‘paranoid’ and was just looking to blame the broker for my losses).

Before you use Parabolic SAR or any other indicator or any EMA’s, SMA’s, etc. etc. cross check your charts / indicators with others from a different source.

This may sound ridiculous my good and trusted friends but read on:

When I first started trading live the funny thing is that this was the very first indicator that I used - and lost a lot of money - and could never figure out why - and - of course - gave up on the indicator.

Eventually - as I got braver - I opened another two accounts at different brokers - and - to my amazement - realised that the Parabolic SAR signals I had been getting at my first broker - were totally different from the Parabolic SAR signals that I was getting at the other two brokers. In other words - at the other two brokers I may have been given a buy signal and then no other signal for a long while - and then eventually a new sell signal came - and so on and so forth. At the first broker - during that same time period - on the same time frame - for the same instrument / pair - using EXACTLY the same Parabolic SAR settings - I had received a ‘gazillion’ buy / sell signals i.e. many many false signals. Now - whether or not this is because whoever programmed the thing did not know what they were doing - OR (which I suspect) - the programmer actually knew VERY WELL what they were doing - get my drift??? Now that I have started looking at this indicator again - I noticed this again. The big problem that I have is the the first broker is my ‘main’ broker because they offer CFD’s and the Indices etc. etc. so I’ve stuck with them for this reason. Needless to say - I don’t use Parabolic SAR to trade the Indices!!! I have noticed this same ‘anomaly’ (for want of a better word) with MA’s at this broker as well i.e. a 50 SMA at the first broker does not look anything like the same 50 SMA at the other two brokers!!!

Now - I’m really not trying to make you paranoid or anything like that - all I’m saying is just check - that’s all. On the instruments that I can trade at my ‘main’ broker - that are offered at the other two brokers as well - I use the Parabolic SAR entry points as indicated by the other two brokers (they are both identical).

Anyway - like I said - post away!!!

Regards,

Dale.

71

Daily results for 5 years using SAR only Long trades only:

GBPUSD
Net profit: $41,700.00
Max. Drawdown: $21,260.00
% Winning: 48.98%

GBPJPY
Net profit: $60,701.01
Max. Drawdown: $11,941.80
% Winning: 64.71%

EURUSD
Net profit: $23,096.50
Max. Drawdown: $17,859.50
% Winning: 37.25%

Including short trades, the performance worstens.

Be prepared for some huge drawdowns my friends.

72

I think this system could benefit greatly from using a trailing stop. Sure, you wouldn’t be in the market all the time, but you wouldn’t lose huge amounts of profit as the market corrects BEFORE the PSAR gives you a reversal signal.

If you can backtest this idea, I’m pretty confident you’d see more profits.

-Benjimang

73

Hi folks!

Neally:

Thanks for doing that backtesting. Those figures are good not?

Benjiimang:

How are you doing?

Anyway - I have been looking at this thing again and comparing it Jame’s system that uses MACD and Parabolic SAR and what becomes apparent is that MACD gets you into the trade a hell of a lot sooner than Parabolic SAR and keeps you in until the end. Just an observation.

At the risk of detracting from the idea of using Parabolic SAR as it was originally designed to be used I am also seeing another ‘bright idea’ coming along here - or something else to try if you’re bored!!!

Put MACD with default settings on your chart and have a good look at the histogram. There is a chap on Forex Factory that came up with idea of trading solely with MACD. The idea being that when the histogram is below the zero line and formed a peak you enter (go long) as soon as the histogram starts rising i.e. when the next MACD histogram is shorter than the one to the left (and of course visa versa to go short). Now - if you have a good look at this (and I have been looking for a couple of days now) - what if you did the following:

Use MACD as your entry point by placing a stop order buy ‘a couple of ticks’ above the bar that corresponds to the current MACD histogram bar that is lower than the preceding one. If that order is not executed i.e. the price continues to fall you move the order to ‘a couple of ticks’ above the next MACD histogram bar and so on and so forth until the order is executed. Your initial stop loss is set to the low of the bar where your order was executed UNTIL a Parabolic SAR dot eventually appears and then you use Parabolic SAR to adjust your stop loss and eventually (hopefully) lock in profits.

In other words - you are not waiting for a MACD cross or anything like that - all you are waiting for is a rising MACD histogram when a peak has been formed below the zero line or a falling MACD histogram when a peak has been formed above the zero line - and then you are waiting for a Parabolic SAR dot to appear and when it does appear you use Parabolic SAR to adjust your stop loss and lock in profit. What this CAN accomplish (I think) is to get you into a trade much earlier and take the guess work or ‘human factor’ out of setting stop losses and taking profit.

Thoughts??? Needless to say I’m about to give it a bash on GBP/JPY 30 Minutes!!!

Regards,

Dale.

74

OK - I thought I’d attach a chart to better (hopefully) explain my thoughts (possibly so that I can understand them better myself).

The attached chart is GBP/JPY 1 Hour

Edit:

Basically - you are tracking the MACD histogram waiting for a reversal and then using Parabolic SAR to set stop losses and lock in profit. That’s why you use stop orders and not market orders - so that if price continues going down (and you are looking to go long) you are not in the trade until the reversal comes.

I know that this is going totally against the reason I started this thread in the first place!!! At this point I can tell you Parabolic SAR does indeed work if used on it’s own very well - free margin is important though - loads of it. Basically I’m now falling into the trap of ‘OK - it’s working - now let’s see if we can’t sqeeze some more PIP’s - no longer satisfied with the tried and tested indicator’!!! This invariably means that I may not be posting for a while again!!!

Regards,

Dale.

gbpjpy 1 hour 09082007.GIF675×544 30.9 KB

75

Bla,bla,bla,bla,bla,bla,bla,bla lets add a few more indicators, reduce the time frame to 30sec,add a few more indicators, oop’s forgot about Mr Fibonacci throw a dozen of those on the chart,can some body develop an EA? I think this is a winner! Now if I had a spare $30 I’d open a micro account and test it for real.

76

Hey mustang, not quite sure what you’re getting at!

What platform do you have? I wish I had 30 second charts! Although I do have tick charts (1 second or less) - there a thought . . . Hmm . . . Maybe . . . !!!

Anyway - here is another chart - GBP/JPY 1 Hour.

Basically - you are placing counter trend orders based on the MACD histogram to get you in early (earlier than Parabolic SAR) and your stop losses appear to be limited in size. Parabolic SAR is then used to adjust stop losses and lock in profit.

Regards,

Dale.

usdjpy 1 hour 09082007 1208 gmt +2.jpg700×632 86.8 KB

77

Dale, the point Mustang is making is that you’re WAY off topic here. You’re talking MACD now, without any reference to PSAR!

78

Yeh - I was worried about that!!!

OK - all I’m saying is that Parabolic SAR on its own DOES WORK - no question. Somebody has backtested it and I’m working with it live right now (since starting this thread) and to date I have not been stopped out with a loss.

All I’m trying to do now (against my own better judgement I may add) is to not ‘lose’ those PIP’s at the beginning of a move and those PIP’s at the end of a move - losing those PIP’s are inevitable with Parabolic SAR by it’s design.

I’m not questioning the validity of the indicator - like I said - it does work - and I don’t think that I’m detracting in any way from the use of the indicator. Like I have stated many times - Parabolic SAR was designed to signal when to enter a position and to provide a stop loss value and to lock in profits and once stopped out to stop and reverse. I am still using it for this purpose - all I’m trying to do second guess the entry point. From that moment on it would not be long until a Parabolic SAR dot appears and then you are in essence trading with just Parabolic SAR again - you just got in earlier that’s all.

Also - there are things that I have noticed about the indicator - and now that I have spent a lot of time investigating its merit - it would be foolish in my opinion to not take advantage of any edge if there is one (contrary I know to my very first message in this thread) - for example - after using this indicator on so many different pairs I have noticed that most of your profits - in most cases - come in the beginning of the move i.e. within the first couple of PSAR dots and the amount of profit per dot (for want of a better explanation) seems to start lessening as you get toward the end of a PSAR trend lets call it i.e. before a stop and reverse. Why does this make a difference? Well - if this is in fact the case - your opening position could be bigger as there is less risk of being stopped out at the beginning of a move. That way you could add on (it’s called ‘pyramiding’) to your initial position if you wanted to but decreasing the lot sizes every time you add on (which is the reverse by the way of 'ol Bill Williams theory of ‘reverse pyramiding’ where you open small and then add on with the biggest number of lots lessening each time - for example - pyramiding would equal open 4 lots / add 2 lots / add 1 lots / close - whereas reverse pyramiding would equal open 1 lots / add 4 lots / add 2 lots / close).

You must take into account that this indicator was develop by J. Welles Wilder many years ago and to the best of my knowledge they did not have the information on tap in those days like we do now and therefore I would imagine that the ‘lagging’ of Parabolic SAR was not of much consequence and there probably was not a whole lot that could be done about it then but - as Gary Moore says - ‘We have the technology’!!!

Is it me or does everone seem to be in a bad mood this morning??? Maybe a few people long on stocks this morning??? Me - I’m short - and laughing all the way to the bank - so don’t spoil my day!!!

Regards,

Dale.

79

Dale

Since we are getting a little off topic here could you point me in any direction for a free demo or charting package where one can see these indices? It sounds like you are not trading any specific stocks, just the dow index or something. I would be interested in looking at some charts and comparing them against some of the yen pairs that are apparently unwinding and looking for correlation.

80

Good morning,

willsucceed:

You are quite right - I’m trading the Dow, S&P 500, Nasdaq 100, DAX 30, FTSE 100, CAC 40, Swiss Market Index (or SMI), Gold, Oil, Silver etc. etc.

You can open a demo account - valid for 30 days I think - at GCI Trading. Open a Live Mini (or Standard) Shares / CFD Account and you’ll have all of the stuff to look at.

You can also open a demo account at Delta Stock. They have all of the above and then some (and they also have the ‘full’ DAX as a tradeable instrument). Delta, unfortuanately, don’t offer any of these instruments live at the moment (I say unfortuanately because in my opinion this is probably the very best broker on the planet but I can only trade forex pairs with them. Having said that they now offer 44 different pairs - have a look). They will be adding all of the above to the live accounts sometime during this month - can’t wait!

GCI: GCI Financial Ltd - Online Forex and CFD Trading
Delta: Forex Trading, Currency Trading, FX, Bulgarian stocks � DeltaStock Inc.

Regards,

Dale.

81

What if the market is not trend,but range:confused: ?pSAR is NOT good,I think…