MACD And Parabolic SAR Forex Strategy

The MACD and Parabolic SAR forex strategy is a versatile trend-following strategy designed to keep you trading at the right direction of the overall buy/sell trend.

The strategy includes the rules to enter a trade, stop placement and trade exit.

The following charts below will help us further understand how things work:

Chart Setup

MetaTrader4 Indicators: ForexLine_update_03.ex4 (Inputs Variable Modified; ForexLineColor2=Red), triangulatMA.ex4 (Inputs Variable Modified; Period=35), Parabolic SAR (Parameters Modified; Step=0.003), MACD (Parameters Modified; Fast EMA=16, Slow EMA=32)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy entry if the following indicator or chart pattern gets put on display:

  1. If the lime dots of the Parabolic SAR MT4 indicator gets aligned below price bars as depicted on Fig. 1.0, price is said to be pushed higher i.e. a trigger to buy the desired forex pair.
  2. If the magenta line of the triangulatMA custom indicator intersects the mostly blue line of the ForexLine_update_03 indicator in a bottom up fashion (see Fig. 1.0),  price is said to be driven to the upside i.e. a trigger to buy the selected fx pair.
  3. If the green histograms of the MACD custom indicator gets placed above the 0.00 level as exemplified on Fig. 1.0, bulls are said to be in control of price, as such a buy alert is said to be looming.

Stop Loss for Buy Entry: Place stop loss 1 pip below the green rising Parabolic SAR Dots.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  1. If the Parabolic SAR forms a lime dot above price bars during a buy signal as illustrated on Fig. 1.0, it is a trigger to exit or take profit at once.
  2. If the magenta line of the triangulatMA custom indicator intersects the mostly red line of the ForexLine_update_03 to stay above it, a bearish reversal is said to be underway, hence an exit or take profit will do.
  3. If the green histograms of the MACD MT4 indicator readjust below the 0.00 level, bulls power is said to be halting, hence an exit or take profit will suffice.

Sell Entry Rules

Enter a sell order if the following holds sway:

  1. If the lime dots of the Parabolic SAR MT4 indicator gets aligned above bars as seen on Fig.1.1, price is said to be pushed lower i.e. a trigger to sell the selected forex pair.
  2. If the magenta line of the triangulatMA custom indicator intersects the mostly red line of the ForexLine_update_03 indicator in a top downward manner (see Fig. 1.1), price is said to be driven to the downside i.e. a trigger to sell the fx pair of interest.
  3. If the green histograms of the MACD custom indicator gets placed below the 0.00 level as illustrated on Fig. 1.1, bears are said to be driving price lower, as such a sell alert is said to be imminent.

Stop Loss for Sell Entry: Place stop loss 1 pip above the green falling Parabolic SAR Dots.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes to the fore:

  1. If the Parabolic SAR forms a lime dot below the candles while a sell signal is running (see Fig. 1.1), it is a trigger to exit or take profit immediately.
  2. If the magenta line of the triangulatMA custom indicator intersects the mostly blue line of the ForexLine_update_03 to stay below it, a bullish reversal is said to be in progress, hence an exit or take profit will suffice.
  3. If the green histograms of the MACD MT4 indicator realign above the 0.00 level, bears power is said to be weaning, hence an exit or take profit will do.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

The ForexLine_update_03.ex4 is a trend following line indicator that changes color based on the prevalent market trend (blue for bulls and red for bears).

The triangulatMA.ex4 custom indicator is a moving average indicator that smoothens our price.

The Parabolic SAR is a technical indicator that was created the renowned technician Welles Wilder, and is used by a lot of traders to gauge the direction of an asset’s momentum.

The indicator is depicted by series of dots that are placed either above or below an assets candlestick on its chart.

The Moving average convergence divergence (MACD) is a trend-following momentum indicator that reveals the connection between two moving averages of price.

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