Parabolic SAR 123 Strategy

Parabolic SAR 123 strategy is a similar to the 123 pattern trading but it looks for the 123 patterns based on the parabolic SAR dots. It occurs very rarely but when it occur it works very good and you can make good number of pips.

Time Fame:

Hourly and Daily Charts. Observe for the pattern in the daily chart and enter trades in hourly charts.

Currency Pairs:

All currency pairs.

Indicators:

Parabolic SAR with default settings.

Other indicators of your choice to enter trades in hourly charts.

Description:

Observe the parabolic dots on the daily chart. When a 123 pattern is formed by the parabolic SAR dots shift to hourly chart. Use other indicators to enter the trades accordingly.

Short Trade:

Put the parabolic SAR indicator on the daily chart. Check that the the trend is downwards and the parabolic SAR dots are above the candlesticks. Now one dot forms below the current candlestick. The next dot forms above the candlestick. Now move to the hourly chart. Use other indicators like stochastic oscillator, CCI etc. For example if you use stochastic oscillator wait for the price to come to the overbought region and when the stochastic oscillator moving averages cross each other you can enter a short trade.

Stop Loss: Use a stop loss of 5 pips above the recent high.

Take profit: It really depends on you. If you use stochastic oscillator you can wait for the price to reach the oversold region and close the trade.

Example:

The following is the daily chart of USDJPY. You can see that the trend is downwards and a 123 pattern is formed. 123 pattern here is, the parabolic SAR dots are above the candlesticks. One dot formed below the candlestick and the next dot formed above the candlestick.

USDJPY daily chart parabolic sar 123 pattern

Now move to the hourly chart. The following the hourly chart of USDJPY. I am using a stochastic oscillator to enter the trades in hourly chart. Wait for the stochastic oscillator to reach the overbought region. And once the stochastic oscillator moving averages cross each other, enter short trades. Here you can see two short trade opportunities.

USDJPY Hourly Chart

In the above hourly chart at the vertical line drawn, the 123 pattern is formed in the daily chart. Now wait for the stochastic oscillator to reach the overbought region and enter short trades.

Long Trade:

Check that the trend is upwards. The parabolic SAR dots are below the candlesticks. One dot forms above the current candlestick. The next dot forms below the candlestick. Now move to the hourly chart. Use your favorite indicators to enter long trades. For example use a stochastic oscillator to enter long trades when it reaches the oversold region and the moving averages of the stochastic oscillator cross each other.

Stop Loss: Use a stop loss of 5 pips below the recent high.

Take profit: It really depends on you. If you use stochastic oscillator you can wait for the price to reach the overbought region and close the trade.

Example:

The following the daily chart of AUDCAD. You can see that the 123 pattern is highlighted.

AUDCAD daily chart parabolic sar 123 pattern

Now go to the hourly chart. Here you can see that the stochastic oscillator didn’t really reach the oversold region but there is a strong resistance line which was broken by the price candlestick. This can be used to enter the trade long trade.

AUDCAD Hourly Chart