The SAR Trading System is a game changer for traders looking to maximize their profits using the Stop and Reversal (SAR) technique, originally developed by Welles Wilder. This system takes advantage of an Expert Advisor (EA) that smartly assesses open positions and adjusts stop losses using parabolic acceleration.
Every time a new bar opens, the EA kicks into gear, moving the stop loss by a value determined by the parabolic system. Thanks to the acceleration factor, the amount by which the stop loss shifts continues to grow, providing a dynamic trailing stop that's responsive to market movements. Let’s break down how this works.
While Wilder designed the SAR to signal a reversal when the parabolic indicator touches the current price, this system effectively utilizes it as a trailing stop, enhancing your trading strategy.
The EA comes with a nifty feature allowing you to open random buy or sell positions to demonstrate how the trailing stop system functions. If the 'Random trade toggle' is set to 'True', the EA will initiate random positions. If it's switched to 'False', it won't open trades on its own.
But don't worry; the parabolic system remains active, meaning the EA can still track positions you open manually or through another expert advisor.
Another neat feature is the ability to delay the opening of a new position for a specified amount of time, which you can set using a timer.
Below are the key parameters of the EA along with brief explanations:
- Initial Stop-loss (points) — The initial stop loss value before the parabolic trailing begins.
- SAR Acceleration Factor Increment Step — The increment for the parabolic acceleration factor.
- SAR Acceleration Factor Max. Value — The maximum value for the parabolic acceleration factor.
- Random Trade Toggle — Switch to activate random position opening (set to true to enable manual trades).
- Timer Frequency (sec) — The delay time before opening a new trade.
Each time a new bar forms, the system recalculates the stop loss value. For long positions, the new value is calculated as follows:
SAR(n+1) = SAR(n) + AF x [EP - SAR(n)].
For short positions, the new stop loss value is determined by:
SAR(n+1) = SAR(n) - AF x [SAR(n) - EP],
Where:
- SAR(n+1) — The stop loss level at the new (n+1) bar.
- SAR(n) — The stop loss level at the previous (n) bar.
- EP — Extremum Point, which is the new maximum (for long) or minimum (for short) price recorded since the trailing started.
- AF — Acceleration Factor, which increases incrementally with each new bar as the price hits a new extremum. It continues to rise until it reaches its maximum value.
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