Moving Average Parabolic SAR Strategy
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If you are looking for a great Forex trading strategy, the Moving Average Parabolic SAR Strategy is one to be familiar with. This is often regarded as a reliable, easy to master, and profitable Forex strategy. Let’s take a closer look at this Moving Average Parabolic SAR Strategy, specifically with a 100 EMA, and how it works.
Moving Average & The Moving Average Parabolic SAR Strategy
Before we can talk about the moving average parabolic SAR strategy, it’s important to be familiar with moving averages. A moving average is a technical analysis technique used in Forex trading and other markets, with the aim of smoothing price histories by average daily prices over a given period of time.
For example, a simple moving average takes the arithmetic mean of a certain number of prices over a certain amount of days. A big advantage of moving averages is to filter out noise from random short term price fluctuations. This is a lagging or trend following indicator because it is based on past prices. This is an important concept to be familiar with for the moving average parabolic SAR.
Before you get into trying to use this specific Forex trading strategy with SAR and moving averages, because you will also need to be familiar with exponential moving averages or EMAs, click here to read our article specifically about moving averages. If you plan on using the Moving Average Parabolic SAR Strategy successfully, this is very important.
Parabolic SAR & The Moving Average Parabolic SAR Strategy
In order to put the moving average parabolic SAR strategy to use, you will also need to be familiar with the parabolic SAR, what it is, and what it does. In stock, securities, and Forex markets, the parabolic SAR is a method used to find potential reversals in the market price direction of traded goods such as stocks or currencies.
This is a method of analysis was devised by J. Welles Wilder, Jr, and it actually stands for “Stop and Reverse”. The parabolic SAR indicator is shown on a price chart of an asset, such as a currency, and it take the form of a series of dots placed below or above the price line of that asset.
A small dot is placed below the price when it is trending upward, and below the price when it is trending downward. Just like moving averages, the Parabolic SAR is also a lagging indicator which follows price direction. For this exact strategy to fully work and put good money in your pocket, you must understand both moving averages and the parabolic SAR.
Something which stands out about the parabolic SAR is that it comes with a built in trailing stop function, as the dots can be used as stop out locations during price climbs. This is one reason why the moving average parabolic SAR strategy is so effective.
Moving Average Parabolic SAR Strategy – Why Use It?
Trend trading is often seen as a great part of any Forex trading strategy, which is where the moving averages come into play, and using the parabolic SAR to identify reversal points can help make trading much more profitable.
This is the point of the moving average parabolic SAR strategy, to trade with the trend while being quickly alerted to trend reversals. The moving average parabolic SAR strategy is all about finding a trend to trade with and realizing when that trend is going to reverse. It is a very effective trading method and its why so many professional day traders use it for Forex.
As you will see, in an uptrend, the dots of the parabolic SAR form under the price until it reaches a certain point, at which point it flips to the top of the price, thus giving you a sell signal. For Forex traders, this flip from the bottom to the top indicates that longs should close their position and sell the market being traded.
Any strategy using the parabolic SAR, such as our will feature this. This moving average parabolic SAR strategy can be used to generate both buy and sell signals.
Moving Average Parabolic SAR Strategy with 100 EMA
For the purposes of today’s example on using this particular Forex trading strategy, we will be working with a period of 100 days. To be exact, here we are using a 100 EMA in conjunction with the parabolic SAR.
The reason why we are using a 100 day EMA for this is because it allows us to stay within the major trend direction while only using signals that fall in line with the trend. It helps with staying in line with the larger trend, thus preventing over trading and trading with false signals.
The Moving Average Parabolic SAR Strategy uses two trend following indicators, a filter needs to be used to help keep away from low probability conditions. This is very important to keep in mind with the Moving Average Parabolic SAR Strategy.
For an exact explanation of how to use this awesome and highly profitable Forex trading strategy properly, it’s benefits, and for a step by step tutorial, complete with live trading, check the live video which we have included here today.
Main Moving Average Parabolic SAR Strategy Trading Rules
Here are the main rules you need to keep in mind to use this Forex trading strategy effectively. Our example is going to be for buy signals, and for sell signals, all you have to do is reverse the instructions for the opposite direction.
- Only trade in the direction of the 100 EMA.
- You need the price to be trading above the 100 EMA average. If the price is fluctuation greatly, above and below the 100 EMA line, change markets.
- For the Moving Average Parabolic SAR Strategy to work, the parabolic SAR must feature a dot beneath the candlestick that will be the buy signal.
- Make sure to place a buy stop order so that the momentum on the break of the setup candlestick high will take into the market.
- Make sure to go a few pips below the parabolic SAR dot to identify the ideal stop loss level.
Once again, for a step by step tutorial on the Moving Average Parabolic SAR Strategy, complete with live trading, watch the video which we have included here today.
Moving Average Parabolic SAR Strategy Final Thoughts
When it comes to trend following indicator trading strategies, this particular one is often regarded as one of the most effective and reliable for Forex trading. The video we have included here today explains it all in great detail, and it’s all quite easy to grasp as well. Finally, if you are serious about learning Forex trading, it is recommended that you join the Income Mentor Box Day Trading Academy.
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