7.25 Strategy 25: Parabolic SAR Trend Riding

For our 25th and final strategy, we are going to learn how to capture the absolute maximum amount of profit out of a massive trend. Many traders enter a great trade, but panic and sell for a 20-pip profit, only to watch the market run for another 300 pips without them. To solve this psychological weakness, we use a mechanical trailing system: The Parabolic SAR.

What is the Parabolic SAR?

SAR stands for 'Stop and Reverse'. When you apply this indicator to your chart, it does not draw confusing lines. Instead, it prints a series of simple 'Dots' above or below your candlesticks.

The Rule is Simple:
- If the dots are below the candlesticks, the trend is Bullish.
- If the dots are above the candlesticks, the trend is Bearish.
- When the price physically touches a dot, the indicator instantly 'flips' to the other side.

Step-by-Step Execution

You do not use the SAR to enter random trades. You use it in combination with a breakout strategy (like Strategy 4: Break and Retest) on the 1-Hour or 4-Hour chart. Once you are in a massive, winning trade, the SAR takes over your risk management.

1. The Initial Stop: When you enter a 'Buy' trade, place your Stop Loss exactly on the very first blue dot that appears below the price.
2. The Trail: As the price shoots upwards, the indicator will print a new dot slightly higher. You manually log into your broker and move your Stop Loss up to match the new dot. You do this every single time a new candle closes.
3. The Exit: You NEVER set a 'Take Profit'. You let the market go as high as it possibly can. Eventually, the market will crash down, hit your trailing Stop Loss (which is now deep in profit), and the dots will 'flip'. You are instantly cashed out at the absolute mathematical peak of the trend.

Self-Evaluation Check