Channel Moving Average and Parabolic Sar is a trend following forex trading strategy. It allows you to open position in the market in the direction of the major trend which increases your chances of winning the trade. Even the newbie traders know that it is crucial to follow the major trend of the market in order to survive in the market. Chanel moving average and parabolic sar trading system is really an amazing trading strategy. It uses four simple moving averages and a parabolic sar. Let’s discuss about the chart setup required in this trading strategy. For the easiness and to remove the confusion among the moving averages you should use different colors in different moving averages. In this strategy two SMAs of same period (32) are used but they are applied to high and low. They actually form a channel so; the strategy is called Channel Moving Average and Parabolic Sar Trading System.
- Simple Moving Average, period 32, applied to high.
You will see this moving average above all the other moving averages in an uptrend while in a downtrend you will see this moving average second-lower than all the other moving average. This moving average works as an upper band of the moving average channel.
- Simple Moving Average, Period 32, applied to low.
In an uptrend market it lies just below the SMA 32 applied to high and in a downtrend it lies below all the other moving averages. It is the second fastest moving moving-average. It works as the down band of the channel.
- Parabolic SAR (step 0.02, maximum 0.2)
It is a trend indicator. It shows whether the trend is up or down. If it appears above the price it indicates the bearish market dominance while if it appears below the price chart it indicates the bullish dominance in the market.
- Simple Moving Average, period 100, applied to close.
It is used to study the mid term trend of the market.
- Simple Moving Average, Period 200, applied to close.
It is used to study the long term trend of the market.
Time Frames and Currency pairs to Trade using Channel Moving Average and Parabolic Sar Trading System.
Time frames: 15, 30 and 60 minutes
Currency Pairs: All
Buy Condition Using Channel Moving Average and Parabolic Sar Trading System.
- Price must close above the 32 SMA, applied to high.
- Price must be above the 100 SMA
- Price must be above the 200 SMA
- Parabolic SAR should appear below the price.
Sell conditions are obtained when you observe the opposite of above signals.
Stop Loss and Take Profit
Stop loss can be placed 5 pips below/above the recent swing low/high.
Take profit can be varied according to the time frames used. You can take your profits when price touches the channel (made by two SMA 32).