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.
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.
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.
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