What is the Parabolic SAR + ADX Forex Trading System
The Parabolic SAR + ADX Forex Trading System combines 2 indicators which work together effectively. This system was invented by Forex traders experiments and is simple and very easy to use. Using the Parabolic SAR + ADX Forex Trading System properly provides great results with high quality trading signals. Lets start with a few words about what the Parabolic SAR + ADX are.
Parabolic SAR. Parabolic Stop and Reverse was first introduced by J. Welles Wilder. (Which also developed the RSI Indicator). The purpose of this indicator is to show potential pivot or reversal levels. It is a trend following indicator and often used for setting a trailing stop, and to find good entry and exit points during the price action in strong trend.
ADX. Average directional movement index. As the Parabolic, the ADX was created by J. Welles Wilder as well. It combines the use of the negative and the positive directional indicators and then smoothing the result with EMA. It is a commonly used trend indicator.
Set up for the Parabolic SAR + ADX Forex Trading System:
- Parabolic SAR set up: 0.02 and 0.2, ADX setup: ADX 50 with +DI and –DI lines.
- Recommended currency pair: Any.
- Recommended time-frame: Any. (my recommendation is to use this method on longer time-frames that usually work better for trend indicators).
- Market entry point: When you see that the +DI line is below the –DI line and the Parabolic SAR provides you with a SELL signal – you should go SHORT. In case you see that the +DI line is above the –DI line – ignore the Parabolic SELL signal. On the flip side, in case the +DI line is above the –DI line, and in addition, the Parabolic provided you with a BUY signal – you should go LONG. In case that the +DI line is below the –DI line, then all Parabolic BUY signals should be ignored.
- Market Exit point: close your position when the DI lines is being crossed again.A relative disadvantage of this trading system: These two indicators are a bit lagging, therefore are must be followed up. However, the combination of these two may generate great profits from high quality trading signals, by identifying and taking advantage of existing trends. To practice the Parabolic SAR + ADX Forex trading strategy, Open a Demo Account Or start trading now on a real live account: Open a Real Trading Account
Learn also about the ADX and MACD Trading Strategy