Parabolic SAR And MACD Swing Trading System
The Parabolic SAR and MACD Swing Trading System is a very simple forex swing trading system that uses two indicators:
- the parabolic SAR &
- the MACD
This trading system can be used with any currency pair.
HOW TO TRADE THE PARABOLIC SAR AND MACD SWING TRADING SYSTEM-THE RULES
- Wait for MACD line to cross-over. Once The MACD lines have crossed over then
- Look To See If the Parabolic SAR has also switched position on the chart. If It does so then
- Place A Buy stop/sell stop order above the high or low of the candlestick at the point where both the MACD & Parabolic SAR confirm trade entry signal.
- Your stop loss should be placed below the low or high of that candlestick-anywhere from 5-30 or so pips depending on what timeframe you are using as well-the larger timeframe you use, the stops may be a bit larger so you need to adjust your risk per trade accordingly.
- To Exit The Trade(Take Profit)-when an opposite trade entry signal is given, then you exit the trade.
ADVANTAGES OF THE PARABOLIC SAR AND MACD SWING TRADING SYSTEM
- It is a very simple and easy forex swing trading system to use
- you can easily spot the trade setups happening
- in a nice trending market, you will make a lot of pips quite easily.
DIADVANTAGES OF THE PARABOLIC SAR AND MACD SWING TRADING SYSTEM
- You will get stopped out frequently if the forex market is in consolidation (or moving in a sideways trend)
- The MACD & Parabolic SAR are both lagging indicators so your trade entries are based on lagging information when price would have made a big move already.
- you stop loss may be quite large. If you place your stop losses quite close, you may get stopped out frequently.
Here is a list of the current most valuable publicly traded companies in the world by market capitalization as of November 20, 2019. On this list there are five NASDAQ listed stocks and four NYSE listed stocks and one company that trades on the OTC market because it is a Chinese company not listed on an American exchange. Eight of these companies are U.S. based and two are Chinese. These are the winners of the past 30 years in the stock market and were the primary drivers of the price appreciation in the stock market indexes. #1. Apple Inc (NASDAQ:AAPL) — $1.174 Trillion#2. Microsoft Corporation (NASDAQ:MSFT) — $1.146 Trillion#3. Alphabet Inc (NASDAQ:GOOG/GOOGL) — $902.3 Billion#4. Amazon.com Inc (NASDAQ:AMZN) — $869.3 Billion#5. Facebook Inc (NASDAQ:FB) — $565.7 Billion#6. Berkshire Hathaway Inc (NYSE:BRK.B) — $531.2 Billion#7. Alibaba (NYSE:BABA) — $477.6 Billion#8 Tencent Holdings Limited (OTC:TCEHY) $409.1 Billion#7. JPMorgan Chase & Co (NYSE:JPM) — $408.2 Billion#8. Johnson & Johnson (NYSE:JNJ) — $355.6 Billion#9. Walmart Inc (NYSE:WMT) — $338.7 Billion#10. Visa Inc (NYSE:V) — $392.3 Billion The best way to make money in the stock market is to find the companies that have the potential for growth and market dominance and ride their trends to the upside.
Do you enjoy trading price action patterns? Would you like to learn some profitable double top strategies? In this addition to my free price action course, I’m going to show you a few profitable ways to trade the double top pattern including my favorite Forex double top strategy. There are many ways to trade the double top chart pattern. In this article, I’m going to show the two traditional double top strategies that I have used in the past. These are the most well known double top strategies. Although these traditional patterns are relatively profitable, I’m going to show you why I don’t trade them anymore. I’m also going to show you my favorite Forex double top strategy and why you should start trading this pattern like I do. What is a Double Top Chart Pattern? A double top is a strong bearish reversal pattern. It occurs when an uptrend fails to make a higher high and instead, makes an equal (or near equal) high. The psychology behind the pattern is that the failure to make a higher high could be an early sign that the momentum is leaving the uptrend. The equal high is an indication that the previous high is being tested and confirmed as resistance. All this means that a reversal is likely to happen. As you can see from the image above, two horizontal lines are drawn off the double top. The top line is the resistance line. The second line marks the middle valley. From here on, I’ll refer to this line as the breakout line. To get your profit target for this pattern, you measure from the resistance line to the breakout line. Then you take that measurement (in pips if you’re trading the Forex market) and duplicate it downward as in the image above. Note: There are varying opinions on where to set your horizontal lines, but I always set my lines off the real bodies of the candlesticks – not the highs or lows. I’m my experience this works better more often than not. Trading the Double Top Chart Pattern Now that we’ve got the basics of the double top chart pattern down, let’s go over the two most common ways to trade it. Both of these techniques are profitable, as long as you don’t try to force a double top entry where there isn’t one. The first Forex double top strategy that we will go over is the standard double top strategy. Entry for this strategy is taken when price breaks below the breakout line. Some traders opt to wait for a candlestick to close below the breakout line and a pullback to the entry point before entering a trade. Your stop loss is placed above the highest high in the double top pattern. As can see from the image above, the reward to risk ratio of the standard double top strategy is not great, which is why I don’t use this strategy anymore. In this example, the reward to risk ratio is less than 1:1. The next Forex double top strategy we will talk about is a little more aggressive. For this strategy, you need to draw a trendline from the most obvious lows of the uptrend to the middle valley of the double top (see the image below). Entry is typically taken after the first candlestick that opens and closes below the trendline. Note: This technique works better when there is an obvious trendline because it’s more meaningful when an obvious trendline is broken. This technique also works better with steep trends because the reward to risk ratio tends to be better. Place your stop loss above the highest high in the double top pattern. As you can see from the example above, you typically get a better reward to risk ratio using this aggressive strategy. It’s often possible to get 2:1 reward to risk ratios or better. In the example above, the reward to risk ratio was around 1.5:1. This is an improvement over the standard technique, but the next technique I’m going to show you is a huge improvement on both of the standard techniques. My Favorite Forex Double Top Strategy This next Forex double top strategy is my favorite technique because it typically provides excellent reward to risk ratios. In the example below, you could have earned nearly 5x your risk. This technique typically provides a 4:1 or better reward to risk ratio. To take the entry, you need to use another trading strategy that provides bearish entries near the tops of cycles. I prefer to use a few specific price action signals, mainly the bearish engulfing pattern and the shooting star (with confirmation and pullback). The Top Dog Trading system also works well for this. In the image above, you can see a nice bearish engulfing pattern that occurred right at the resistance line. Entry would be taken on the open of the next candlestick. The stop loss would be placed above the highest high in the double top (as shown in the image above). Note: When using this technique, it’s important that the first top in the double top pattern is followed by a nice bounce down. This helps to confirm that top as a resistance zone, which is important when you’re taking a very aggressive entry like I do with this strategy. The get your take profit, use the same technique as you would with the standard double top strategies. By getting a great entry and using the traditional take profit method, you can get some great reward to risk scenarios with this trading strategy, which means you only need to be right 1 out of every 4 trades or so to be profitable. Final Thoughts With the traditional aggressive strategy as well as my favorite Forex double top strategy, I prefer to move my stop loss to break even before price returns to the breakout line because the breakout line could be a potential support zone which causes price to reverse and take out your stop loss. In the traditional aggressive example above, the entry was too close to the breakout line to use this technique. It’s important to give the trade room to breathe. In the example of my favorite strategy, however, there was plenty of room to move the stop loss to break even before price reached the breakout line. I like to use strong price action signals as entry triggers for this strategy. For instance, I like to wait for an engulfing pattern in which the engulfing candle closes in the bottom 1/3rd of its range. Shooting stars should be followed by a bearish confirmation candle (which also closes in its bottom 1/3rd range) and then a pullback to the close of the shooting star. Regardless of which double top strategy you choose to use, trading MACD divergence can help qualify them. When your double top coincides with lower highs on the MACD histogram or signal line, the double top will typically be a stronger pattern. I hope you like this Forex double top strategy. All of these double top strategies are profitable, but it takes some screen time to get a feel for what a good pattern looks like as it’s setting up. As always, backtest and demo trade any new strategies until you get the hang of them.
Markets only trend a small amount of the time, they spend most of their time going sideways or become volatile and go no where. While catching a big trend can be profitable after a break out or break down of a range there are other ways to make money. Swing trading is a trading method that tries to capture gains in a market over a period of a few days to several weeks. The goal of a swing trader is to capture a large part of a potential move in price. There are many different types of swing trading signals, buying the dip into oversold levels, buying the momentum of a swing back to the upside, or buying the dip into a key moving average support. Here are a few examples of my favorite swing trading signals to buy. Moving average crossover signals can get you back into a swing back to the upside in price based on backtested signals that put the odds in your favor. You can decide to lock in profits at the 70 RSI overbought level or let your winner run for as long as possible by using the cross under of the moving averages as your exit signal. Buying price dips to the oversold 30 RSI level can create great risk/reward ratios in the stock indexes and leading stocks as many times you will find buyers at those levels ready to step in and send the price back higher. The 50 RSI and 50 day moving average are good profit targets when you enter at the 30 RSI. A good initial stop loss is to exit if price closes below the 30 RSI. Many times markets in long term uptrends will bounce near their 200 day moving averages creating a good risk/reward entry or when a market breaks back over the 200 day moving it can be the first sign that a new swing higher in prices could be underway. These signals are not perfect and they don’t work every time, the key to making money with swing trading is keep your losses small with stop losses when they don’t work out and let your winners run with trailing stops when they catch a swing.