This strategy involves using the Parabolic SAR in its default settings as part of a price breakout system which is very simple to use. It can be used on the hourly and daily charts of each currency pair to be used for this strategy. The only indicator used for this strategy is the Parabolic SAR, used in its default settings.

For those not used to the complexities of using multiple indicators, this is the forex strategy that typifies simplicity. All the trader needs to do is to apply the Parabolic SAR indicator to the daily chart so as to detect the trend of the currency pair. The daily chart is the best representation of the trend of the asset.

Following detection of the trend of the currency pair, the analysis moves down to the hourly chart. The same time period on the hourly chart which corresponds to the trend on the daily chart is pulled up and a search is made for when the price action breaks the dots that make up the Parabolic SAR indicator in the direction which is opposite to that on the hourly trend, but in the direction of the trend on the daily chart.

In other words, if the trend on the daily chart is seen to be going downwards, then the signal to look for on the hourly chart is for the parabolic SAR dots below the candles, and to initiate a short trade when price breaks below a trend line drawn to connect the dots. It becomes clearer on the charts below. Take a look at the daily chart for the EURUSD which shows the currency pair in a downtrend.

This is supported by the position of Parabolic SAR dots, which are found above the candles. The date in view is December 22, Heading to the hourly chart of December 22, , we see that the Parabolic SAR is initially showing up under the candles.

So what we do in order to trade with the larger trend downtrend is to draw a trend line which cuts across the last dot of the Parabolic SAR, then wait for price to break this line downwards.

If the breakout candle moves too far, allow the price to pullback to the trend line, then use a Sell Limit order to initiate the short trade. The Take Profit level is set to the point where the Parabolic SAR dots reappear under the candles, or it can be set to a level that is equivalent to double or triple the stop loss. The trader searches for a currency pair in an uptrend on the daily chart. This is supported by the appearance of the Parabolic SAR indicator below the price action candles.

When this has been done, the next step is to go to the hourly chart, and look for where the dots of the Parabolic SAR dots are hanging above the candles on the day in reference. Trace a trend line that cuts across the last of these dots, then wait for price to break above this line. Allow for a pullback, then place a Buy Limit order using the trend line as entry price. The long trade example was taken from the GBPUSD charts of April 6 and 7, We display the daily chart here, which shows that the currency pair is trending upwards.

We head down to the hourly chart, which shows that on the day in focus, there was an initial placement of the Parabolic SAR under above the candles. A trend line is drawn across the last dot, and we watch for a break of this trend line, which occurred the following day as shown in the chart below:.

In this example, the close of the breakout candle was so close to the trend line that the trade is one that could be initiated immediately without waiting for a pullback. The beauty of this strategy is that there is no need to use any other indicators. Simply know what to do with the Parabolic SAR indicator as we have indicated and the trader will bank some good profits.

Stop Loss The stop loss for the trade is set to a few pips below the trend line which has been drawn to form the reference point of the trade. The beauty of the strategy lies in how simple it is to use and execute.

It requires only one indicator. However, it is advisable to practice this strategy thoroughly on the charts so that the best results can be obtained when used on a real money account.

The strategy described here is that of the Parabolic SAR breakout system. This strategy aims to trade the break of price action above or below the Parabolic SAR indicator dots on the hourly chart, after obtaining trend confirmation of this strategy on the daily chart.

The indicator used in this trading strategy is the Parabolic SAR indicator.

Forex breakout system review

The Parabolic SAR is used in its default settings. The only other indicator that may be used is the moving average indicator.

A short term moving average such as a day moving average is combined with a long term moving average such as a day moving average , and the cross of the shorter MA over the longer MA in the direction of the expected trade is usually enough to confirm the signal. The technique for this strategy starts on the daily chart. Recall that the Parabolic SAR indicator is basically a trend following indicator, so establishing the real trend of the currency pair is essential to the success of this strategy.

After the trader must have used the daily chart to detect the trend of the asset, the one hour chart is then deployed for the purposes of trade confirmation and entry.

The trader picks the same time period represented on the daily chart and looks out for the break of the Parabolic SAR dots oppose the trend of the asset. In essence, if we see an uptrend on daily chart, then look for the price action to break above the dots of the Parabolic SAR indicator which will be seen above the candlesticks. Take a look at the daily chart below.

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This chart features the GBPUSD currency pair that is clearly in an uptrend, demonstrated by the appearance of the Parabolic SAR dots below the long daily candle of November 13, Now that the direction of the trend has been established, the trader then pulls up the hourly chart, and searches for an area which features a Parabolic SAR signal in the opposite direction as was seen on the daily chart i. The aim is to draw a line across this area, and trade the break of the candlesticks in an upward direction.

This can be seen on the chart below:.

Look at the hourly chart above. We can see that there is a Parabolic SAR signal obscured by the brown trade entry line which is located above the candles.

We want to trade a break of this area, so we draw a horizontal line across it, and then take our stop loss to be the swing low on the chart 57 pips away at 1.

We then extrapolate our Take Profit to be twice the stop loss pips upwards at 1. The trade entry is made on the break and pullback of price action on the brown line drawn across the Parabolic SAR dots located above the candles on the same day that the long signal was obtained on the daily chart.

For the short trade strategy, the daily chart is used to look for where the Parabolic SAR gives a short trade signal i. We then trade the break of a horizontal line drawn across these dots.

In the daily chart above, the indicator dots signaling a downtrend appeared on October 24 th , but we had to wait until October 28 th to get a picture of a true signal. When we move over to the daily chart, we then see the breakout level as applied, along with the stop loss 41 pips above trade entry and Take Profit at 82 pips below trade entry.

You are free to practice this strategy on a demo platform until you perfect it. However, it should be noted that the strategy will only work when the market is trending. You can use several trend detection methods to confirm this such as the use of two moving averages, with the short moving average crossing the long moving average to confirm a true trend. This is when the trader can then start looking for the Parabolic SAR indicator signals.

With this strategy, a trader can get signals on several currency pairs every single day. It is essential though to use currencies which trend naturally, and also use moving average crossovers to confirm when the currency pair is truly trending.

Then the Parabolic SAR dot strategy can be used with confidence to produce very good trades. Mail will not be published required. You can use these tags: Contact Us Sitemap Affiliate Program Trading in financial instruments carries a high level of risk to your capital with the possibility of losing more than your initial investment.

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