Forex Trade – Intelligent Forex


Double Your Profit by Using Parabolic Stop and Reversal to Help You Time Your Entry

Posted in Forex Tips by intelligentforex on January 8, 2010

There are a lot of questions about how to properly time the entry of a trading position and this is no doubt one of the major factors that affects the success of a trader. However it is pretty hard to find an answer to this question online and it is also one of the answers I am looking for when I was new to trading some years back.

Being able to enter a trading position at the right time means that you are less likely to be stopped out in your position and you will be able to grab more profit and either one of this can make you a successful trader. A lot of successful traders who make a living from trading rely a lot on their ability to time their entry as it will prevent them from being stopped out more frequently and thus help them to make more winning trades.

There are various ways you can use to help you time your entry but I will be going through one forex indicator called the parabolic stop and reversal or commonly known as PSAR. The way this indicator works is by placing a dot either below or above the candlestick in your chart.

When the dot is below the candle, it basically is indicating a bullish movement and when the dot is above the candle, it is showing a bearish movement.

However, you do not trade solely with the position of the dots. You need to integrate the parabolic stop and reversal indicator into your trading system and then use it to time your entry after the confirmation from other indicators in your system. Personally, I use it together with the multiple moving averages as well as the moving average convergence divergence to create an entry system.

For the moving averages, I use the 50, 100 and the 200 exponential moving averages as a way to show me the trend. As for the moving average convergence divergence, I use the crossover between the line and its trigger line to confirm a trend. As for the parabolic stop and reversal indicator, I use it as a way to give me signal to enter a trade.

When my multiple moving averages are stacked upward in good angle and separation, it is actually signaling an uptrend. I will take a look at my moving average convergence divergence indicator for a bullish crossover after a dip in an uptrend and I will only enter a trade when the parabolic stop and reversal in my lower time frame flips to the bottom of the candle which is also indicating to me an uptrend.

When my multiple moving averages are stacked in a downward manner with good angle and separation, I will then wait for a bearish crossover to appear in my moving average convergence divergence indicator and I will move to my lower time frame chart to wait for the parabolic stop and reversal indicator to flip to the top of the candle before I enter a trade.

I rely a lot on the parabolic stop and reversal tool for the entry of my trading position and so far it has been quite reliable. I have made quite a number of successful trades with the it and I hope that you can also put this tool to your trading plan to enhance your success.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: