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Forex trading strategy #2 (Parabolic SAR + ADX)

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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Hi Lynn,

Yes, you'd need to change the settings to 50 as per original rules.
These rules are based on our own observations. You may certainly change ADX settings at your choice. Take a look at ADX 50 versus ADX 30 versus ADX 14. Whichever one fits your trading style and tells you more about the market should be left.

Best regards,
Edward.

Good day Ezra,

can you please advice on the settings of Parabolic SAR on the 1 hour chart when using your own strategy.I need to know because the default setting sometimes gives me false signals.

Try Par SAR 0.01 , 0.1
There will always be some false signals, no matter what trading strategy you use.

Someone mention the following:

>>USE EMA (63 DAYS) with Parabolic SAR and with ADX (14)

I setup a chart using the above and based on past data it seems that this may work. However, I'm not sure if I should based all my trading on this method using daily charts. Please advise. Thanks.

The larger the time frame the less trading signals you get, but those that you get will be the most reliable. With shorter time frames you will get more trading opportunities, but the rate of false signals will increase.

The strategy should work equally well for all time frames.
Start with daily or 4 hour charts, trade them for a while and decide whether they fit your trading style or some changes are needed.

Regards,
Edward

The charting service I have has DMI and ADX as separate indicators. So should I set the DMI to 50 like the ADX?

Thanks

That is correct.

Regards,
Edward

Hi Edward,

I am testing this system and so far have found the 21 EMA to be very beneficial in reducing the number of false signals.

With regards backtesting, how do you carry this out? Do you simply go to the charts and scan along manually and note entry exit as if you were trading live? This is what I am doing but it takes a while! Is there a way you can gather a decent amount of data in "bulk"? Also what platform do you use to backtest? My broker only has charts going back a short way.

Many Thanks and keep up the inspiring work!

Matt