Combining the Parabolic SAR with the 6-period and 14-period moving averages creates a dynamic trading strategy that blends momentum with trend confirmation.
Open Account: http://pocketoptioncapital.com
The Parabolic SAR (Stop and Reverse) is a powerful tool that helps traders identify potential trend reversals. When the SAR dots flip to the opposite side of the price, it often signals that a change in trend direction is imminent. This makes it an excellent tool for managing entries and exits, especially when used in conjunction with short and medium-term moving averages to confirm the strength of a trend.
The 6-period simple moving average (SMA) serves as a fast-moving indicator that quickly reacts to price changes, while the 14-period SMA provides a slower, more stable view of the market’s direction. A bullish signal is generated when the 6 SMA crosses above the 14 SMA, and if the Parabolic SAR is also showing dots below the price candles, it strengthens the confirmation of an upward trend. Conversely, a bearish crossover—where the 6 SMA falls below the 14 SMA—combined with SAR dots above the price indicates a high-probability shorting opportunity.
This triple-indicator strategy allows traders to better filter out market noise and avoid false signals. For example, during sideways or choppy markets, the SAR may produce frequent reversals, but waiting for alignment with the moving average crossover helps avoid whipsaws. When all three indicators align—SAR, 6 SMA, and 14 SMA—the probability of a successful trade setup increases significantly. By managing risk with tight stop-losses just beyond the SAR reversal level and trailing profits as the SAR progresses, traders can potentially capture substantial gains in trending markets.
Money Management:
It is important to follow up with this strict rule of investment:
If you have $100 in your account, each open position should be $5 tops
If you have $200 in your account, each open position should be $10 tops
If you have $500 in your account, each open position should be $25 tops
If you have $1,000 in your account, each open position should be $50 tops
If you have $2,000 in your account, each open position should be $100 tops
If you have $5,000 in your account, each open position should be $250 tops
We're currently in our 13th year helping traders become successful in the live markets so we know a thing or two about leveraging a small account into serious wins.
Open Account: http://pocketoptioncapital.com
Risk Disclaimer:
Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.
