Forex & Stocks “EMA-Parabolic SAR” Trading Strategy

Low-Risk “Forex & Stock Market” Trading with EMA and Parabolic SAR indicator . The nice thing about the Parabolic SAR is that it is really simple to use. We mean REALLY simple. Basically, when the dots are below the candles, it is a BUY signal.  When the dots are above the candles, it is a SELL signal.

This is probably the easiest indicator to interpret because it assumes that the price is either going up or down. With that said, this tool is best used in markets that are trending, and that have long rallies and downturns.

You DON’T want to use this tool in a choppy market where the price movement is sideways.

 

This strategy can be used on any time frame on your chart. So day traders, swing traders, and scalpers are all welcome to use this type of strategy.

Here are the indicators you need to apply on your chart to use this trading strategy:

• Parabolic SAR indicator: Default Settings.
• 40-period Exponential Moving Average = Blue color in our example
• 20-period Exponential Moving Average = lime color in our example

This “EMA Parabolic SAR” trading strategy will show you how to use the parabolic SAR indicator effectively and how you can add this trading system into your daily trading techniques.

 

• Download “TraderVersity-EMAparabolicSAR” (Zip/RAR File).
• Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
• Copy the “TraderVersity-EMAparabolicSAR.tpl” file (template) to your Metatrader Directory …/templates /
• Start or restart your Metatrader Client.
• Select Chart and Timeframe where you want to test your forex system.
• Right-click on your trading chart and hover on “Template”.
• Move right to select “TraderVersity-EMAparabolicSAR” trading system and strategy.
• You will see the “TraderVersity-EMAparabolicSAR” system is available on your Chart.

 

When seeking to open buy positions, observe indicator readings as follows:

• Rule number 1: Apply Parabolic SAR and Moving Average indicators to your chart.
• Rule number 2: The moving averages must cross over.
  • In a long trade, the 20 period moving average will cross and go above the 40 periods moving average.
• Rule number 3: The Parabolic SAR Indicator must change to be below price candle.
  • Notice how the dots were above the price. The parabolic SAR formula showed us that the price stalled out for a few candles and then the dot appeared below the candle. This is a sign that a reversal may be forming.
  • Since the moving averages are telling us that a downtrend is most likely going to occur, we will wait until the dot appears again below price candle to validate this reversal and enter a trade.
• Rule number 4: Parabolic SAR dot must be below price candle AND moving averages cross to where 20 period MA is above 40 period MA.
  • Note** One of these elements may occur before the other. The reversal dot can appear before the MA lines cross. Or the Moving averages can cross before the reversal candle. As long as there are both elements, the entry criteria are met.
• Rule number 5: Enter The Next Price Candle.
  • Enter BUY the very next price candle after the dot appears below the candle.
• Rule number 6: Stop loss / Take Profit
  • Simply set and move your stop-loss to the price level of each dot in the direction of your trade.

 

When seeking to open sell positions, observe indicator readings as follows:

• Rule number 1: Apply Parabolic SAR and Moving Average indicators to your chart.
• Rule number 2: The moving averages must cross over.
  • In a short trade, the 20 period moving average will cross and go below the 40 periods moving average.
• Rule number 3: The Parabolic SAR Indicator must change to be above price candle.
  • Notice how the dots were below the price. The parabolic SAR formula showed us that the price stalled out for a few candles and then the dot appeared above the candle. This is a sign that a reversal may be forming.
  • Since the moving averages are telling us that an uptrend is most likely going to occur, we will wait until the dot appears again above price candle to validate this reversal and enter a trade.
• Rule number 4: Parabolic SAR dot must be above price candle AND moving averages cross to where 20 period MA is below 40 period MA.
  • Note** One of these elements may occur before the other. The reversal dot can appear before the MA lines cross. Or the Moving averages can cross before the reversal candle. As long as there are both elements, the entry criteria are met.
• Rule number 5: Enter The Next Price Candle.
  • Enter SELL the very next price candle after the dot appears above the candle.
• Rule number 6: Stop loss / Take Profit
  • Simply set and move your stop-loss to the price level of each dot in the direction of your trade.

 

No strategy can give you a 100% win ratio so always be placing your stops at the appropriate areas. I would recommend practicing making both short and long trades with this EMA Parabolic SAR trading strategy.

DOWNLOAD TRADING SYSTEM