Using Parabolic SAR in Automated Trading

The Parabolic SAR Trailing Stop strategy uses the indicator's dynamic stop levels to protect profits while allowing winning trades to run. Rather than entering on SAR signals, this approach uses another indicator for entries and SAR for automated stop management.

Setup in Tradeworks:

1. Add Parabolic SAR indicator to your strategy
2. Add entry indicator (e.g., Moving Average or MACD) for initial trade signals
3. Use Parabolic SAR exclusively for stop placement (see Trade Management below)

Trade Management

• Entry: Use separate indicator (e.g., MACD Signal Line crossover or EMA crossover)
• Stop Loss Exit Signal: Continuously update to current SAR level
  • For longs: Set condition to 'Strategy symbol BID price is less than Parabolic SAR value'
  • For shorts: Set condition to 'Strategy symbol ASK price is greater than Parabolic SAR value'
• Take Profit Exit Signal: Use separate target (fixed pip amount or R:R ratio), or exit when SAR crosses from below to above Price (reversal)
  • For fixed target: 'Strategy symbol BID price is greater than (Previous bar close plus (2× ATR))' (longs)
  • For SAR reversal: 'Price crosses from below to above Parabolic SAR' (shorts) or 'Price crosses from above to below Parabolic SAR' (longs)
• Suggested Timeframe: 4-hour to daily charts for smoother SAR adjustments
• Suggested Pairs: Strong trending pairs like GBP/USD, EUR/USD
• Trading focus: While Parabolic SAR works across markets, this strategy example focuses on forex pairs like EUR/USD and GBP/USD—common instruments for SAR trading approaches.
• Filter: Only apply trailing stops when ADX is greater than 25 (confirmed trend)