The PSAR indicator is an indicator developed by J. Wells Wilder. This is an indicator used to identify a trend or change in trend. PSAR is displayed as dots above the price, indicating the market is in an uptrend, or below the price, indicating a downtrend. In addition, PSAR is the indicator used by many traders to move the stop loss to follow the trend very effectively.

The strategy we explore in this article can be used in many different markets. And it's best to use it when the market is trending.

However, when using only PSAR it had a lot of noise. That is why we need to combine PSAR with other indicators to increase the probability of trading signals. And the indicator that we use in this strategy is the EMA. When combined with EMA, the reversal signal will have more confirmation, the rate will also increase.

Here are the notes for the trading strategy:
  • Parabolic Sar is installed by default
  • The periodic moving average of 40 and 20
Now we get into the trading principles for this strategy. We consider selling orders. You buy orders based on the principle of sell orders, we think the opposite.

Step 1: Install the necessary indicators for the strategy into the chart

As shown in the chart above, blue is the cycle average of 40, and red is the cycle 20.

Step 2: The Parabolic SAR indicator must be above the price

In the picture above there are dots below the price, the price has also been paused for hours and a dot has also appeared above the price, indicating signs of reversal are forming.

Step 3: Moving average has a cross

The 20 moving average crosses below the 40 moving average. As shown below:

As you can see, the 2 moving averages have crossed, now PSAR has also appeared below the price. Now we need to wait for PSAR's dot to reappear above the price to confirm the reversal and find trading opportunities.

Step 4: Review the necessary conditions to participate in the trading

The two most important conditions for a sell strategy are that PSAR must be above the price and MA20 cuts below MA 40. These two conditions are interchangeable, whichever comes first. As long as there are 2 factors is okay. Then wait for the PSAR to reappear above the price and look for a chance to enter the trade.

Step 5: Open a short position at the next candle

When the dot has just appeared on the price, we wait for the next candle to open and then open a short position.

Step 6: Stop loss and take profit

Your stop loss will be 30-50 pips away from your entry point. Find more resistance (for sell orders) or support (for buy orders) to add quality to the strategy.

We exit (take profit) when MA20 crosses above MA 40 or when PSAR appears below the price.

Above is the strategy for selling orders. Buy orders we make with the same principle but the opposite. The figure below is an example of a buying strategy:

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