- 1 Chart setup for Parabolic SAR and MACD strategy
- 2 How to trade Parabolic SAR and MACD strategy
- 3 Pros and Cons of the Parabolic SAR and MACD Strategy👍👎
- 4 Frequently Asked Questions❓
- 5 GENERAL RISK WARNING
Today you will learn about the Parabolic SAR and MACD strategy. Our indicator combo will also include the average EMA. You will learn how to open successful trades lasting +/- half an hour from a 5-minute chart.
Trading long-lasting positions on IQ Option presents higher probability of getting winning trades. However, you must know the direction the markets are taking before you enter into a long trade. In this guide, I'll teach you how to use 3 different indicators to accurately predict a trend reversal. This will help you enter long winning trades on the IQ Option platform.
|→The Parabolic SAR and MACD strategy, combined with EMA, helps predict trend reversals for long-lasting trades.|
|→This strategy works best when trading trend reversals in fluctuating markets and requires proper timing.|
|→While no combination of indicators guarantees 100% effectiveness, practicing and refining this strategy can increase the probability of successful trades.|
Chart setup for Parabolic SAR and MACD strategy
Once you've logged into your trading account, you should first set up each indicator individually. Next, click on the “Added” feature on the indicators tab. This will show all indicators added. Click n the “Save indicator template” link at the bottom.
This allows you to use this set of 3 indicators in your future trades without having to set them up individually again.
Note that each indicator's settings should be adjusted to suit your trading strategy and preferences. For example, if you're trading 30-minute intervals, you can change the settings as follows: use EMA10 and MACD 12, 0.26 and 9.
On your trading chart, use 5-minute time frame with Japanese candles.
Which indicator works best with Parabolic SAR?
Mixing indicators is never easy. You have to combine the tools you use with meaning. The PSAR itself is most often combined with moving averages. For our strategy today the Parabolic SAR is combined with the MACD and the average EMA. We want to get signals from the three indicators simultaneously, which should increase the probability of a successful trade.
When combining indicators it is very important that the strategy gives a sufficient number of good signals. If too many rules or indicators are used it may turn out that the created methodology produces 2 signals per month on a 5-minute chart. You will agree that this is not an optimal situation. It is very easy to miss such a signal and at the same time, it is very difficult to wait for it while watching the chart.
How to trade Parabolic SAR and MACD strategy
This set of indicators works best when trading trend reversals. It's therefore important that you wait until you observe clear market fluctuations. The good thing is that, once the trend reversal occurs, all three indicators will signal it.
The strength and effectiveness of the Parabolic SAR and MACD strategy lie in the proper timing of the signal, which combines 3 popular technical analysis indicators. Very often after a signal appears the price immediately moves in the desired direction. Not always, of course. Remember that no combination of indicators can give you 100% effectiveness.
Pros and Cons of the Parabolic SAR and MACD Strategy👍👎
- Helps predict trend reversals for long-lasting trades.
- Combines three popular technical analysis indicators for increased accuracy.
- Works best in fluctuating markets, providing more trading opportunities.
- Requires proper timing, which can be challenging for novice traders.
- Not 100% effective, as no combination of indicators can guarantee success.
- May provide fewer trading signals if too many rules or indicators are used.
|Parabolic SAR||Helps determine the direction of the market trend and potential reversal points.|
|MACD||Identifies trend direction and strength, as well as potential reversal points.|
|EMA||Smooths out price data, helping to identify trends and potential entry or exit points.|
When to enter a long-lasting buy position
The MACD green line must cross above the red line. At the same time, the charts have developed a bullish candle (green). The EMA10 cuts through the bullish candle and moves under the prices. Finally, the Parabolic SAR stops above the prices, breaks and starts moving under the prices.
When to enter a long-lasting sell positions
Here, the green MACD line must cross under the red line. The chart develops a bearish candle which the EMA10 cuts across and starts moving above the prices. Finally, the Parabolic SAR stops and breaks under the prices. It then starts moving above the prices.
Parabolic SAR and MACD strategy is a good way to identify when the trend is reversing and place long-lasting trades. Note that if you're using 5-minute interval candles, your trades should last at least 30 minutes if you're to increase the probability of making winning trades.
Now that you've learned how to use this set of indicators, try them out on the IQ Option practice account. Share your results in the comments section below.
Frequently Asked Questions❓
- Q: Can I use the Parabolic SAR and MACD strategy on other trading platforms besides IQ Option?
- A: Yes, you can apply this strategy to other trading platforms as long as they support the required indicators (Parabolic SAR, MACD, and EMA).
- Q: How long should my trades last when using this strategy with a 5-minute chart?
- A: Your trades should last at least 30 minutes to increase the probability of successful trades.
- Q: Can I use this strategy for shorter time frames like 1-minute or 3-minute charts?
- A: While you can try this strategy on shorter time frames, it is designed to work best with a 5-minute chart and 30-minute trades.
- Q: Can I use other moving averages instead of EMA?
- A: Yes, you can experiment with other types of moving averages like SMA or WMA, but the strategy outlined in this article specifically uses EMA.
- Q: Is this strategy suitable for beginners?
- A: While the strategy may require some practice and proper timing, it can be suitable for beginners who are willing to invest time in learning and refining their skills.
GENERAL RISK WARNING
Kindly note that this article does not provide any investment advice. The information presented regarding past events or potential future developments is solely an opinion and cannot be guaranteed as factual, including the provided examples. We caution readers accordingly.
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