Forex Trading Strategy – Combining Exponential Moving Averages and Parabolic SAR

Forex Trading Strategy – combining Exponential Moving Averages and Parabolic SAR

You will learn about the following concepts

  • Indicators used with this strategy
  • Signals to be looking for
  • Entry point
  • Stop-loss
  • Profit target

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For this strategy we will be examining the 1-hour chart of EUR/AUD. The indicators we will be using are: a 14-period Exponential Moving Average (EMA) set to high (blue on the chart below), a 14-period EMA set to low (also blue in color), the Parabolic SAR with default settings (0.02; 0.2) and the Slow Stochastic Oscillator with settings 5,3,3.

As soon as a candle closes above the 14-period EMA (high), the Parabolic SAR positions under the candle and the Slow Stochastic is not overbought, this is a setup to go long. A trader may set a trailing stop at the 14-period EMA (low). Once the Parabolic SAR changes its position, the trader needs to exit.

As soon as a candle closes below the 14-period EMA (low), the Parabolic SAR positions above the candle and the Slow Stochastic is not oversold, this is a setup to go short. A trader may set a trailing stop at the 14-period EMA (high). Once the Parabolic SAR changes its position, the trader needs to exit.

Below we visualize one long and one short trade, based on this approach.

chart 8.0

chart 8.1

If you have any questions or suggestions you are welcome to join our forum discussion about Combining Exponential Moving Averages and Parabolic SAR
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