Forex trading strategy #2 (Parabolic SAR + ADX)
Submitted by Edward Revy on February 28, 2007 - 15:01.
The two indicators we are going to talk about here are found to be very well working when used side by side. This Forex trading system is an another simple discovery; and hundreds of such discoveries can be made when traders are there to learn and experiment.
Any currency pair and time frame can be used.
Indicators: Parabolic SAR default settings (0.02, 0.2), ADX 50 (with +DI, -DI lines)
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I agree. That would work too.
Started testing this strategy today. Using the ADX 50 value.
Edward, I read something about when the 1H and 4H are contradicting. Can you tell more about this?
Do you mean if the SAR has different directions in the 1H and 4H timeframe?
This seems like a powerful strategy, but as always, a few false entries. Take a look at the screenshot below.
I would have entered after the candle in the red box would have closed, especially after it touched the 20 line.
And then I would close/loose the trade after the candle in the green box would have closed..
Any suggestions on how to prevent this?
It seems this system can work well for equities as well.
I did some back testing on Tradestation and FXY came out the best for long trades. AAPL was quite good as well.
Question-
The ADX 50 seems a bit slow on daily charts-does using the hourly and 4H speed this up?
Can you comment on using currency ETF's as opposed to standard forex?
Thanks so much.
Yes, SAR can give different signals on 1H and 4H. You have to choose preferably one superior TF to follow the signals through or to use it for confirmation.
False signals similar to the one illustrated above will happen. We can't eliminate all of them (at least this type would be difficult to eliminate). The more conditions and filters we add up, the more complex it obviously gets, and, ultimately our trading results can become less attractive.
ADX 50 will remain slow on any time frame.
I presently trade only Forex, so can't really comment on ETF's, I'm sorry.
Kind regards,
Edward
Hi Edward,
i put your strategy into an EA. Some good trades, but more losses. Please send a mail to cool-fk()gmx.de then i will send you the EA.
Best regards,
Florian
Thank you Florian,
I'm not an expert in fine-tuning the EAs, unfortunately. My only recommendation would be to limit it to trading during most active market hours, perhaps.
Kind regards,
Edward
I have just had a serious look at the system you proposed and like the look of it. The beauty is in the simplicity of it's action and, hopefully, a "bread winner" if followed correctly. So, I'm going to apply this to my trading to see how it, and myself, perform.
Many thanks to you and everyone else for their system strategies and assistance with FX trading.
shabbie.
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