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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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just to be clear, Edward, i will explain how I set the strategy on, please give me any correction if you have:

+ Put a ADX with respectives DIs at 50 everyone
+ Put a SAR default
+ I use Eur/Jpy or Usd/Jpy in 1 or 5 minutes charts -yes, scalping!-
(you said any pair x/jpy is better for this method)
+ Open long when:
- DI+ is above DI-
- no matter ADX or DIs position in chart
- enter exactly when SAR changes signal from Sell to Buy
+ Open short when:
- DI+ is below DI-
- no matter ADX or DIs position in chart
- enter exactly when SAR changes signal from Buy to Sell
+ SAR points are the Stop-Loss and maybe the position for take profits (is it?)

In brief, I supose this are the best requirements, but I need your opinion please, mainly about the SAR signal to open position and take profits, if I am scalping what is the goal I could get for trade in 1 min chart? help me! ;-D

So many thanks !!

Hi,

your summary is correct.
SAR indicator is the final indicator to check before entering a trade.
SAR also suggests stops, however, if you scalp, the stop might be a bit far, so, I would suggest revising it to the last closed candlestick on the chart your scalp with.
Your scalping target would be 5-7 pips per trade on 1 minute and 10-15 pips on 5 min charts. When scalping fixed profit targets work better.

Best regards and happy holidays!
Edward

hello edward,
while surfing i found this web page few days ago,what a great work you and your team is doing, superb, amazing. God bless.
any setting for these indicators to work for eur/usd pair in 15 min and 30 min timeframe

thanks in advance
abdul

Thank you, Abdul

the SAR would be the same, or you can also try (0.01, 0.1).
ADX could be lowered to 30, or kept the same.

Best regards,
Edward

Hi Edward and all,

Today i decided to test this strategy on FSB(forex strategy builder).
I've configured all long/short entry/exit rules just like Edward told in the first post of this thread.I were not using any SL or TP.

Here is balance chart(in pips):

And here is whole strategy overview file: Strategy Overview

And strategy FSB file: Parabolic_SAR_ADX.xml
*Edward you can open it in FSB and have a look at entry rules setup, maybe there is some mistakes.

------------------------------------------
Symbol: EURUSD
Time frame: 1 Hour
Tested period: 2009.01.02 - 2010.02.19

Overall result:
Account balance: -397 pips
Minimum account: -931 pips
Maximum account: 530 pips
------------------------------------------

Well, as we see from the image above, strategy is not so good for period: 2009.01.02-2010.02.19
But i've also tested shorter(1 month) period: 2010.02.01 until today, and the result is better:

So the conclusion is: strategy is not so bad, but we need to choose right moment - when we can use this strategy and when we can not.

p.s. i've noticed that all big losses are coming when DI+ and DI- are crossing each other very often. Then we are getting a lot of false signals even if our ADX period is 50 or higher.

Thanks
Sid

Hi Edward And Other Users

This strategy has great potential - i have been looking at the strategy on 30 min chart. If mid-trade the parabolic switches yet the DMI's don't cross in the opposite direction should i still remain in the trade and take this as a false signal??

Also have the parabolic and DMI's got to confirm simultaneously or are you allowed to enter if there is a slight delay between DMI and parabolic signals???

Many Thanks

Hi,

when in a trade, if Parabolic switches, but DI is not confirming it, I would tighten the stop very well and also examine the candlestick patterns for any clues as to how dangerous or short lived this reversal is, or may be it was a spike only.

The signals from SAR and DI don't need to appear simultaneously.

Regards,
Edward

What about using the SAR as stop loss, and simply move it with every new candle?