Trading with Parabolic SAR and MACD

The strategy of trading with Parabolic SAR and MACD is highly effective when the market is in a strong trending condition. By combining these two indicators, you can identify potential entry and exit points in the market trend. Here are the steps:

Indicators Used:

1. MACD (Moving Average Convergence Divergence): Used with standard settings (12, 26, 9).
2. Parabolic SAR (pSAR): Default settings (step = 0.02 and maximum = 0.2).

Entry and Exit Rules:

1. MACD Setup: Wait for the MACD line and signal line to cross (MACD cross).
2. Parabolic SAR Setup: Observe if the Parabolic SAR points on the chart have changed position.
3. Buy Entry:
   • Point A: Watch for the Parabolic SAR point to change position from above price to below price (signal for buy entry or sell exit).
   • Point B: Place a buy stop order when the MACD line crosses the signal line from below to above and the Parabolic SAR point changes position from above price to below price (A).
4. Buy Exit:
   • Point C: Exit the buy position or place a sell stop order when the MACD line crosses the signal line from above to below and the Parabolic SAR point changes position from below price to above price (C).
5. Sell Entry:
   • Point D: Exit the sell position or place a buy stop order when the MACD line crosses the signal line from below to above and the Parabolic SAR point changes position from above price to below price.
6. Sell Exit:
   • Point D: Exit the sell position or place a buy stop order when the MACD line crosses the signal line from below to above and the Parabolic SAR point changes position from above price to below price.
7. Stop Loss: Place the stop loss at the nearest support or resistance level, according to the planned risk management.

Notes: 

• This method works well when the market is in a strong trending condition. 

• Note that order placement is only done when there is a MACD cross and the Parabolic SAR point changes position almost simultaneously. 

• Always adjust the stop loss according to the planned risk management.

By following these steps and understanding the signals provided by both indicators, you can increase your chances of success in trading, especially when the market is in a strong trending condition.

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