Hi Mike1349:
Yes, there are three parameters that you can change when you put the indicator on the chart. When you first select the indicator to put on the chart, a window will open. Look through the tabs on that window to find the parameters to make the changes.
Look at my post about three earlier than this one where I recommend the IcyCloud system here on Babypips. It looks good to me.
Barry
sar is great but when the price is ranging, it’s mostly useless. so what do you do when the pair is ranging? follow the dot or do something else?
I’ve spent a few hours reading through this thread, lots of great info and research. As many others have already stated the simple use of the SAR seems to be effective, but the required discipline required to follow a single indicator obediently is pretty tough. Also, it seems that a conclusion has been made that this system works great in trending markets, and poor in ranging markets. I’ve also been looking for ways to avoid the “whipsaws” where you get 2 or 3 dots in one direction, and then another reversal which continues the original trend. Maybe it’s just me, but one of the indicators that seemed to help a decent amount when I was backtesting is the RSI (relative strength index). If you look at a daily chart, you can see that on a “true” reversal, where the SAR dots change direction and a good trend results, the RSI usually crosses through the 50 mark. On a lot of of the false trends, the RSI never goes through 50, and stays above or below it. If someone could explain to me how to take a screenshot of my chart and post it, I could show some examples. dpaterso, I think it’s great that you have invested so much time with this thread, it actually inspired me to get back into trading more. I am currently in college and don’t have a lot of money to trade with but I’ve decided that I’m going to save a few hundred dollars and get back into it, with caution of course… don’t want to lose what I can’t afford to… :o
edit… I was reading back a few pages on the thread and there was a discussion about editing the parameters for SAR so it is better suited for different currency pairs. I use Oanda and I know I can change several numbers for the SAR settings, I was just wondering if anyone has had good results tweaking the settings at all…
Hello folks,
walkonwallstreet:
You’re quite right!!! What to do with this indicator in a ranging market??? Stay away!!! That’s the long and short of it. You need another indicator like Wilder’s ADX to tell you whether or not the market is ranging i.e. ADX is below 20 or has good directional movement i.e. ADX is above 20 (although there is a lot more to ADX than ‘meets the eye’ all of which is explained in ‘New Concepts In Technical Trading Systems’ by Mr Wilder. Personally, I don’t find ADX being too reliable with forex pairs but it works perfectly on CFD’s, Commodites, Metals, and, of course, the Indices. Somewhere (on another forex forum) someone suggested using ADX on the Weekly (or greater) timeframes with Parabolic SAR on the daily timeframe and this does seem to have some merit.
chirules54:
Thanks for the kind words. I agree with you (about RSI) which is also one of Wilder’s indicators (and is widely used by EVERYONE - don’t let ANYONE tell you that indicators are useless - this one is not)!!! Again: there is far more to RSI than ‘meets the eye’ but you have (one of) the basic concepts of the indicator. Look: ‘pure’ Parabolic SAR will work in the long run i.e. there is just no question about it. The main problem for me has always been the HUGE initial stops (which cost me dearly in the past) and, of course, what happens when the market is ranging (and then, as I said before, Parabolic SAR IS NOT correctly plotted by most trading platforms). As far as the stops go, however, I have come to realise that the HUGE initial stops are not an issue if your account is big enough to handle the potential loss i.e. the potential loss if stopped out does not exceed your ‘allocated loss percentage’ e.g. 2% of your capital i.e. then these HUGE stops are of little consequence because Parabolic SAR will always turn a profit in the long run BUT you have to be able to ‘see yourself through’ these losses. Now you could say to yourself “OK - instead of using Parabolic SAR’s HUGE initial stop - I’ll limit my loss on entry to my ‘allocated loss percentage’ and, if the trade goes against me, then I’m still ‘safe’”. The problem with this is that this goes against Parabolic SAR’s ‘design’ so most times you end up getting stopped out when you should / would not have been stopped out had you been following Parabolic SAR ‘to the letter’ BUT if you have a small account that one time that Parabolic SAR is wrong will kill you. As far as ‘tweaking’ Parabolic SAR for different currency pairs etc. etc. etc. I know that this has been ‘touched on’ earlier in the thread and I am a firm believer that this should / could be done although I have never really ‘sat down’ and seriously worked on it but I think some work has been done by various people on this subject. Like I said earlier: there are a couple of ‘things’ that I am trying to ‘smooth out’ with Parabolic SAR and as soon as I come up with something ‘worth its salt’ I’ll post (I don’t want to go posting solutions and ideas and then find that I was ‘over excited’ or ‘overzealous’ and in the long run I’ve been wrong - as I have done in the past - although - being honest with myself and you - the reason that I went ‘belly up’ had nothing to do with Parabolic SAR - but rather with the ‘discipline’ involved in following this indicator ‘religously’ as you have quite rightly stated.
how do you read the ADX?
my ADX now is +DI 9.8947 -DI 22.1660
what is that mean? when -DI is above 20 the market is not ranging is that what u mean?
thank you!
You need to read up on this if you are going to use it as there is quite a lot to it. A rising ADX shows a trend often taken as above 20 with above 50 suggesting trend overextension. The position of + and - DI give you trend direction but there is MUCH more to this indicator
Hi,
ADX consists of three lines (not just two) i.e. +DI, -DI, and ADX. It’s when the ADX line is below 20 that the market is (supposedly) in a range. ADX (Average Directional Index) calculates whether the market has directional movement or not i.e. no directional movement equates to ranging. Make sense?
The other two ADX lines i.e. +DI and -DI CAN be used to enter and exit trades i.e. when +DI crosses -DI from below i.e. +DI is moving up and -DI is moving down take a long entry and stay with this entry until they cross in the opposite direction i.e. stop and reverse to go short and so on and so forth OR enter as described here and place your stop at the high or the low of the day then the lines crossed. In this case you would need to determine when to take profit (possibly determined on what I have detailed in the next paragraphs).
The ADX line itself can indicate when a trend is about to start i.e. when the ADX line has been below both +DI and -DI and then starts crossing to the point where it has risen above both of these lines then that should signify the start of a trend. The longer that ADX has been below both of these lines the stronger the ensuing trend should be.
The ADX line itself can also indicate to you that a trend is coming to an end. Normally what you’ll find is that when there is a good strong trend the ADX line is rising (be aware that the ADX line will be rising whether the current trend is an uptrend or a downtrend i.e. it is indicating the STRENGTH of the current trend NOT the DIRECTION of the current trend). When the trend is about to ‘blow off’ ADX will start to level out and turn down. A very strong indication that a trend is about to end is if ADX has been going up, turns down, then turns up again, and, on the next down turn, you can be pretty certain that the trend has come to an end. Wilder says that even if the ADX line turns down and you don’t want to exit the trade then this is a good time to take some profits anyway.
Parabolic SAR and ADX together?
Wilder himself suggests that Parabolic SAR be used in conjunction with ADX i.e. only take long trades when +DI is above -DI and the ADX line is above both of these lines and only take short trades when +DI is below -DI and the ADX line is above both of these lines.
thank you for your answers. they have been very helpful
right now im looking at 2 charts one from metatrader 4 and the other from the charts provide by fxcm (marketscope) or something both are EUR/USD daily. they are displaying different values on the ADX
Although both show the same thing ie a non trending situation since ADX is falling. Of course this is nothing more than you can see by eyeballing the chart and this is the issue with indicators. They can give you a numerical value but often you can see the phenomena just as well. Now as ADX turns up it will be indicating a trend again but so will the break to a new high, holding of a trendline or support level etc. The cross of the +DI over the -DI will indicate an uptrend but I bet your eye picks up on that as well! Dont get me wrong I am not rubbishing this or other indicators but trying to encourage people to concentrate more on price and realise that indicators at best are a support act
thank you dpaterso and tonymand. you guys are being very helpful to me.
just wondering which best currency pairs do you guys trade? i want to spread the risk by trading 5 or more major currencies…
I would recommend you do the opposite and concentrate on 1 pair and get to know it real well. Multiple pairs do not spread your risk. I think GU is the best place to start currently with good volatility without being extreme. EU is a better behaved alternative and is trending well
the way i look at it is that not every pair is going to follow SAR 100% and some pair might be ranging and you dont even know. so to diversfy a bit will lower the risk?
Hello,
Well (at the risk of disagreeing with Tony):
Of late I have been ‘sticking’ to the following pairs (with various ‘systems’ but must add that I have not been using Parabolic SAR for a while):
EUR/USD
USD/JPY
GBP/USD
USD/CHF
EUR/GBP
GBP/JPY
EUR/JPY
USD/JPY
EUR/CHF
USD/CHF
Basically I made up this list from what are considered to be the ‘majors’ as well as somes ‘crosses’ that Bloomberg TV has on their ‘ticker’ the ‘logic’ being that these pairs are (must be) the most ‘popular’ and therefore have decent liquidity. Now and then I ‘get a ahead of myself’ (usually when I’ve made a bit of money) and start trading the ‘exotic’ pairs (GBP/ZAR for example) or add a ‘commdoll’ into the equation (AUD/USD for example) and everytime in the last month or two I’ve been ‘nailed’ (and the system that I’m using mostly at the moment takes small consistent profits but relies on huge stop losses so you only have to be wrong once or twice on the ‘exotics’ or the ‘commdolls’ and you’re right back to square one. Basically I have to DISCIPLINE myself to stick to these pairs only (with forex trading anyway) and things should be alright.
I am a firm believer in ‘spreading the risk’ i.e. at one stage I was trading 44 pairs with Parabolic SAR but because of the inclusion of some of the ‘exotics’ with their HUGE spread if these positions turned to losses they would pretty much negate any profits that you made on the more ‘popular’ pairs (listed above). My opinion (for what it’s worth) would be to trade the above pairs if you have valid Parabolic SAR entry signals AND whether you have RELIABLY been able to determine whether or not the pair is range bound or trending.
At some point in time I ‘toyed’ with the idea of ‘weighting’ the different pairs but this never seemed to go anywhere e.g. a 1 pip movement on GBP/JPY certainly does not carry the same (monetary) ‘weight’ as a 1 pip movement on EUR/USD. The idea was to ‘weight’ the pairs so that no single loss (on GBP/JPY for example) would negate your profits on the rest of your positions but, like I said, this idea was never persued. I seem to remember getting the calculation from one of my brokers at some stage and if you’re really interested I’ll ‘fish it out’ from a backup. If I remember correctly, though, it was not a ‘workable’ solution because you always had to take the current exchange rate for that day into consideration when doing the ‘weighting’ so the calculation could never be ‘consistent’ i.e. sort of like ‘trying to push a piece of string’.
Disclaimer:
Let’s of course always bear in mind that I am the one who suffered tens of thousands of dollars of losses last year so always bear this mind when ‘taking my advice’ (although, strange as it may sound, if I only took my own advice, I’d be well up by now by the looks of things)!!!
I know what you means, just placed an order on USD/CAN and im loosing. Will leave it overnight and see if it improves.
Dale so whats up with you at the moment. I started reading this thread only recently and only covered the pages where you were doing better than just well. And now i see you saying that you are no longer using indicator SAR to trade. As i am only starting to use SAR in real trading myself.
That of course makes it particularly important to take note of what you say. Nothing like the school of hard knocks for teaching lessons and to survive that and move on is what so many cannot do
Good morning everyone!!!
Great day!!!
OK - well - first - thank you Tony - a very nice comment - and much appreciated.
vxdxm (what does that stand for anyway):
As I have said on numerous occasions before: I have absolutely no doubt that Parabolic SAR IN THE LONG RUN I.E. THINK MONTHS AND YEARS will turn a profit and a huge one at that PROVIDING that you have the patience and the capital to suffer the inevitable drawdowns. Why am I not using Parabolic SAR to trade? Simply put I have come to the realisation that trading with Parabolic SAR does not suit my personality. Now I know that this is a very ‘cliched’ statement that we all (well me anyway) have seen and read about and heard from time to time but we (well again me anyway) choose to ignore the importance of that statement and let me tell you that it’s not to be taken lightly. It’s like any ‘job’. Study or work in a field that really interests you and makes you happy and you will succeed but study something or choose to work in a field that you absolutely loathe and you will eventually fail no matter what the potential rewards for the simple reason that you cannot and will not be able to sustain a high level of dedication and motivation and will eventually either loose interest or just end up doing a bad job. Unfortuanately for me: I KNOW that Parabolic SAR (whether it’s plotted correctly or not) will make money in the long term but I am just not one of those people who can wait for days on end for a valid Parabolic SAR signal and then hold onto the position until it’s stopped out i.e. I need to trade everyday; I need to have open positions all of the time; I need to ‘work’ this business on a daily basis. Parabolic SAR does not give me what I need to excel at this business. I would go so far as to say this: if you are the kind of person who has been able to save money in a savings account at a bank then you will be able to ‘work’ Parabolic SAR; if you’re not (and I have NEVER been able to save money for any extended period of time) then Parabolic SAR will drive you ‘nuts’. Invariably what will start happening is that you close trades out early, constantly mess with what would have been ‘good’ trades, and because you’re frustrated you will hold on to ‘bad’ trades because you’re now angry that the indicator has let you down and these ‘bad’ trades will, in the end, finish you off. This business is, more than anything, a ‘mind game’ and if you cannot get your mind ‘around’ the ‘system’ or indicator that you are using it will ‘push you over the edge’ - no question. As a matter of interest: when Wilder presents Parabolic SAR in his book and shows you chart examples these charts examples cover months and months of trades i.e. one chart covers an entire year of trades. In other words: it appears that trading any timeframe shorter than a day did not even cross his mind.
I am trading all of Wilder’s other systems in his book and they are working for me. One of them give me trades every single day, takes (small) profits most of the time (and yes: losses sometimes) every single day; another gives me trades ‘just about’ every other day; and the other one is longer term (I have not yet had a valid entry point on this one yet but it’s coming). They are purely ‘technical’ in nature and leave absolutely nothing to ‘chance’, my imagination or interpretation of the market, or any other ‘human factor’ and all of these factors suit ‘who I am’. For the first time in just over a year of trading I am ‘at peace’ with trading and it’s not becuase I’m making small profits i.e. even WITH his systems I have had a few VERY bad (stop) losses BUT the difference is that I no longer get ‘angry’ with the market because I’ve been stopped out and then invariably try to ‘get back at the market’ i.e. I am able to take the losses ‘like a man’ and carry on with the next trade.
Now for anyone reading the above: this does NOT mean that I am abandoning this thread (or even Parabolic SAR for that matter) i.e. this thread has (for me anyway) become so much more than a thread about an indicator or trading system so I check it and post everyday (especially now that I have my broadband back)!!! I will keep posting as long as there are people here that are interested in what I’ve got to say (no matter whether they are interested in what I’m doing and what I’ve learned OR if they’re having a ‘good ol’ ‘chuckle’ at me). There are ‘things’ that have been shared on this thread by everyone that you cannot and will not find in a book, a forex course, or anything like that. Aside for the technical ideas that have been shared on this thread, it’s the sharing of ‘trading pshycology’ and ‘raw emotion’ that is presented in ‘hard core’ style here.
For the reasons mentioned above I urge anyone new to this thread and new to trading to read the thread and to not just ‘jump on the indicator’ because it ‘seems like’ a ‘sure fire way to make money’ (of course you can skip over all my ‘drivel’ relating to music and my favourite bands). Trading IS NOT easy money: it’s sheer hard work. I firmly believe that had I put this much effort into any other endeavour in my life I would be an extremely wealthy person by now BUT for a very long time I have been making money doing things that I had lost interest in and, as such, ended up doing only what was necessary to sustain my lifestyle i.e. I would never have ‘gotten ahead’. Now while that may sound strange given what happened last year and the financial problems that it’s caused I am sure ‘to my core’ that this is what I want to do for a living and I still really and honestly and truly believe that I can indeed ‘master the trade’ (no matter how long it takes) and that the EVENTUAL rewards, aside from the possibility of them being extremely ‘fruitfull’, will be more satisfying when achieved than anything else I could have ‘turned my attention to’. This ‘business’ is not to be taken lightly. It WILL make or break you, and, if you don’t have an absolute passion for it, it will be your financial downfall. I no longer trade because I’m trying to ‘get rich quick’ and ‘pay bills’ (those are so far in arrears now that it’s really of no consequence anymore i.e. I will take what comes my way from my creditors). I trade simply because ‘I love it’. As I have said before: I have learned more about myself and about the world around me in the last year or so than I have learned in the preceding forty two years of my life and I would not change it for the world. I will continue to trade until I have ‘mastered the trade’ OR it has cost me every single thing that I have i.e. until I have no resources left to continue trading or until I can finally say that ‘I am a trader and that’s how I make my living’!!! I believe that this is the commitment needed!!!
My goals (and these are as important as a profit target): to ‘master the trade’, pay my creditors (eventually - if they’re prepared to wait), and build up my capital to the point where I can trade the full size (not futures) Dow, S&P, and Nasdaq because I believe that that’s ‘the big time’. For now: I’m happy to build my account up dollar by dollar no matter how long it takes!!!
I am always happy to help or share my ideas so don’t let this thread die!!!
It stands for Vadim, my first name. Thanks for clearing out what you are currently doing. To be honest your threat encouraged me to open a live account and trade, and this is what i am doing at the moment. In some of your posts you were talking about thousands of dollars and in some you were struggling to pay for broadband. And i wanted to know where you went wrong, but you last reply pretty much summarised it all.
If can help you by sharing my good and bad experiences then it’s pleasure.
I suppose my success and failure last year were due to a number of reasons and it would be hard to pick one single factor that contributed to my situation. Yes - at one stage - I was up BIG TIME (that’s pretty much around the time that I started this thread if I remember) but although it was great at the time it ‘fooled’ me (and others) into thinking that I had found ‘the holy grail’ of systems and that probably gave me a very false sense of security which then caused me to trade carelessly because I was just ‘assuming’ that I finally ‘had it’. Also - in retrospect - even when I made that money - I can’t honestly say that it was a pleasurable experience (although it may have come across as just that at the time) i.e. the way it was made did not suit my ‘trading personality’ and when I could not replicate my ‘windfall’ then that was pretty much the ‘start of the slide downward’. The market has taught me humility I can tell you that much. Put it this way: every profit I make now (no matter how small) I feel that I have ‘actually made’ i.e. worked for it and it was NOT pure ‘luck’ and that makes a world of difference. It allows one ‘privilege’ to start thinking ‘hey - I can make a living out of this business’ as opposed to thinking ‘I hope my luck lasts’. See the difference?
I wish you all of the good trades in the world (I won’t wish you ‘luck’)!!!
Edit:
Somebody sent me an email saying that they don’t understand why I say that Parabolic SAR is ‘the ‘b’ all and end all’ of indicators and I’m so sure that it will make money in the long run but yet I don’t use it to trade with (right) now. What’s the deal?
Let me explain it another way:
Like I said: using Parabolic SAR does not seem to suite my ‘trading personality’ EVEN IF it will make money in the long run. What happened to me on numerous occasions (after my ‘luck’ had run out) was that I would open a position, let it run for days, only to find out three or four or five days later that the trade was ‘bad’ and I ended up making a loss or only a small profit after five days of ‘work’. You then start asking yourself ‘well what is point if that’s all I’m going to make in five days’ and this affects you (me) phsychologically i.e. it would then cause me to ‘overtrade’ and ‘chase’ the market to try and accelerate my earnings and invariably this would (and eventually finally did) result in a ‘wipeout’. It also made me start looking at other indicators and other methods to ‘combine’ with Parabolic SAR and when THESE trades went wrong it was even worse. I need to know, soon, whether my trade is good or bad i.e. the way I’m trading at the moment I will know within a day or less whether or not a trade is good or bad and if it’s bad then I can ‘stomach’ the loss and move on to the next trade. With Parabolic SAR, when a good trade went bad, it took a long time to recover and was very difficult to stay positive. What all of this says about me as a person - I do not know but, as I have previously stated, Parabolic SAR WILL make money for you IF IT’S RIGHT FOR YOU.
Whew… I’ve been reading this thread for the past week off and on and I finally finished reading all 185 pages today. The journey it took was pretty interesting, starting out with the simple parabolic sar, evolving into a more complex system with ema, rsi, macd, and other indicators, and it seems like it has sort of ended up right where it started, that pure parabolic sar can work and that the other indicators didn’t help as much as once thought. Dale, I have a few questions and comments about the whole thread now that I have read the entire thing…
they are listed below, I numbered them to make them nice and clear… 
Many times during the thread, you mention the creator of the parabolic sar, J. Welles Wilder and a book he wrote, New Concepts in Technical Trading Systems. You mentioned that you currently use some of his systems, including one that gives you trades “almost every day”. I was just wondering, are these systems you are using in this same book I just mentioned, or a different book?
It also seemed that you had more success with pure parabolic sar and other indicators created by Welles in the commodity and stock market indices than with forex… am I correct? I remember many pages ago you mentioned soybeans and how it behaved very well with psar and how the comms and indices seem to “behave” better than forex when it comes to using psar.
Over the course of this thread, several different indicators were used to compliment pure psar, I have looked at many of them on charts and while some of them do seem to filter out some bad whipsaws, they also can keep you out of some good trades if you use them along with psar. ADX, MACD and the 50-day ema were a couple of the ones I looked at especially, did you ever come to a conclusion about which of these, if any, was most successful? Personally I believe that the idea of ADX is great, since it’s supposed to keep you out of ranging markets where psar doesn’t work well, but as you mentioned earlier in the thread, it didn’t seem to work too well with forex.
Many times towards the beginning of the thread you talked about being careful with the “commdolls” aud, nzd, cad, and zar. You said it would be best to not take a position in these trades unless the commodity “agreed”. I know that aud, nzd and zar are usually correlated with gold and cad with oil… does a move in the forex pairs usually happen AFTER the commodity has moved one way or the other? This would make sense to me, I just wanted to confirm. Also, I found a good link showing currency correlations, not sure if everyone has seen these charts but they look beneficial to me…
I am interested in trading commodities and stock indices as well, do they require more capital to trade than forex? My forex broker is oanda and I can make trades as small as $1 but the only commodities available to trade are gold and silver.
Right now on my chart I have the parabolic sar with default settings (0.02, 0.2) 50 ema, and bollinger bands. I have noticed that, like the other indicators, the bands tend to keep you out of a lot of whipsaws if you only follow psar when the dots are outside the other bands, but you do miss out on some good trades when the psar dot stays inside the bands, but still lead into a good trend. I also noticed that the 50 ema does a good job showing major trends, but sometimes, especially in ranging market times, when the price closes alternating above and below the 50 ema several times a week, you can take some bad losses if you enter the trade. However, once the price gets further away (but not too far) from the ema or if the candle has closed above or below it 2 or 3 days in a row, this is a confirmation of a good trend. It does get you in late on many trends though. I believe this was mentioned before, but my idea was to weight the trades, so if macd and psar and the 50 ema all give you a good signal, maybe you can risk more on a trade than if say, just psar gave you a good signal.
Anyway, I think this is a great thread, probably the best I have read on the site and just reading the first 10 or 20 pages made me want to read the rest to get the “full story”. I am also going to buy Wilder’s book this weekend and give that a good read. While reading through this thread I went through many stages where I added this or that indicator to my chart because it was the new idea, I’m just glad I waited to read the whole thread before jumping on and getting a bunch of trades in :o. I can only see this idea evolving and getting better, and I would love to contribute in any way possible… So many others have already and it only can improve things the more we have “on board”… Anyway, good luck everyone with your trading and I hope to soon join you all in business (right now I only have $50 in my oanda account and I am just trading 1 cent pips to try some things out so no big profts or losses for me!)
