SAR Method on 4hr Charts

Jim,

Thank you for sharing the system. Going through your other threads, it's clear that you are a very creative and inspiring trader. I will certainly keep following you with interest.

What I like about this version of SAR is its simplicity and clean charts. I'm going to backtest and demo trade it on H1, experimenting with profit targets as well as moving the SL and the reverse order separately, depending on what PA is doing. From your experience, apart from the fact that H1 trading SAR requires more attention than H4, would you be able to recommend one time frame over the other as far as monthly profit potential is concerned?

I have a few other questions too:
1. Have you ever compared the results of trading SAR with and without the indicators (QQE Adv and MACD Platinum)?
2. Do you keep the trades open through the weekend?
3. Do you ever scale in and if yes, how?

I would also very much appreciate a video showing the best way to start your first trade with this system.

Thanks. Jo

Hey Jo,

Thanks for the kind comments. They are appreciated.

To give you an idea on what our trading aimed for, we traded three pairs using this system on the 1hr charts only. They were the EUR/USD, USD/CHF and GBP/USD. We would trade all three pairs simultaneously from the start of the week and we were looking for an overall profit of +200 pips. Once that was achieved, we quit trading for the week. This may have been by Monday lunchtime or Friday night, it didn't matter. The temptation was continue trading if you hit the target early in the week. We did try it a few times, but we found what happened was that we would then give back our profits and then bust our guts to get the same +200 pips by the end of the week. The old greed factor.

We could have done things better. Maybe tried different pairs. But this was going back a few years and spreads on some of the more exotic pairs like EUR/NZD etc were a little ugly for our liking. I was always concerned about the correlation between the CHF and the EUR also, but having said that, if you did find yourself in the same direction on both at the same time, you always knew that one of them was going to be a winner.

What time frame would be better? That is hard to answer. The 1hr charts require a lot of work as you have to be in a position to monitor them and make any necessary adjustments at the top of every hour. Doesn't sound too hard, but it does affect your sleep. Trust me on that. Hence the reason we traded as a team. When I did trade the 4hr charts previously, I was trading a lot more pairs and keeping things pretty simple with a straight out profit target on every pair of 200 pips. This trading as 24/5 as it is quite easy for me to monitor the charts every few hours. This started off well with profits of about 2000-2500 pips in the first two months, then when I started calling the trades live in a forum, the next two months were flat. Didn't lose anything, but it was a lot of work for no return. But I can see potential here as even with a couple of flat months, the big winning months more than make up for it.

So in a long way around answering your question, it comes down to your ability to monitor/adjust the charts and also how much profit you are after. No simple answer.

And to answer your other 3 questions:
1. Never really looked at the two systems combined. With the indicators, you tend to get way more signals than you would with the SAR system. I guess I could look at setting up the indicators on the daily chart and then trading the SAR of the 4hr chart, and using the daily as a filter??? Plenty of options available.
2. On the 4hr charts, no problems with keeping open over the weekend. Some weekends are good to you and some are bad (this one) but they tend to work out in the wash. However on the 1hr charts, I'm not sure about that. I would be reassessing my open trades near Friday close and looking at closing them and depending how the new week opened, you maybe in a position to re-enter the same trades. More than likely close on the 1hr charts though as just too risky for my liking.
3. Never scale into trades as it is just something I can't wrap my head around. I may sometimes scale out of trades though, but not with the SAR system.

I will also try and do up a video that shows how I pick a starting point. Should be up within 24hrs. Cheers. Jim

Hi Jim thanks for all the effort you have put into making first grade videos with very clear explanations.
With yr Stop And reverse you must be constantly in a trade unless you take profit & break the chain/sequence, what ea are you using.
Obviously trading on H4 will give large moves but nobody knows when a trend ends or begins.
I think Todd Mitchels clear trend analysis would help, when restarting/entering a new trade.
Kind regards
Nev

Hey fellow traders,

Just made a video showing how I enter a trading sequence. Had a few questions about it and hopefully that will clear it up. Basically you just go through the motions of setting up trades prior to where you want to start. Find a decent move in one direction and just start putting the yellow lines on the chart and moving the red SAR line until you get to a point where it is then activated in your nominated trading time, then you take it from there. Don't get too stressed about it because even if you do mess up the first entry, then your 2nd trade should get you back in the sequence anyway.

Check out the video below, but make sure you watch it in HD...



Nev,
Told you I was a bit of a retard when it comes to Skype. Somehow managed to cancel your attachment during a Skype update?? With regards to your above question, I'm not using an EA at all at this stage. I pretty well just enter all the orders manually. I did try to explain it in the video but not sure I did a very good job. With the 4hr charts, as long as you can check them at least every 8 hours (2x candles), you should be right as you are always one order in front anyway. It would take some pretty major news or event/s to move the market quickly in both directions within one or two candles. And you are right, I would be in the market at all times if I wasn't using a profit target etc. I'll have to check out this Todd Mitchel's clear trend analysis also. Thanks. Jim

gspajon,

My apologies. You sent me a private message but it appears your settings won't allow me to reply to it, so I can probably answer your question here.

First up, thanks for taking a look at the system. You are right, it is very simplistic. And to your question, no I have never thought about adding to my position size when the trade is moving in my desired direction. But now that you have mentioned it, I do have a couple of favourite indicators I use all of the time for my EA trading. I may throw them on the chart and check it out. I have done this previously, but with my settings on these indicators, nothing really aligned. I did toy with the idea a while ago of just trading one pair with multiple systems/EAs, different time frames and different settings. Obviously you would need a broker that allows hedging etc. But you have given me something to think about. Cheers. Jim

I found your web site and sent you an e-mail as well...I left my contact information there and when you have the chance I hope we might be able to chat a bit...I have been studying this method on a 6 hr candle and am very impressed...

Finding a way to add into trades that are going your way will really optimize the power of this method...hope to speak soon.

Hello again Buff and others ....

Buff, I have just finished viewing your last video. It's well presented and easily understood, thank you.

It occurs to me that this system could be described as a "breakout of the last four Highs" for a reversal to the downside. And the other direction would be "breakout of the last four Lows" for a reversal to the upside. ( There is more to deal with than last four H and L's of course )

Also, it might be a simple job for the programmers to create an indicator to display the "breakout of the last four Highs" or the Lows as the case may be. The SAR line might be programmable as well ??

Unfortunately I am not in any way a programmer, so I will have to leave the idea for others to consider.

Thanks fairwind. I always use to call it a breakout type system, but the original creator didn't agree with that description. Not sure why. I have discussed this system with my gun programmer in the past and she was pretty confident she could build an EA based on the basic rules. I didn't take it any further at the time as I had other things on the go. In the next few days, I will try do up another video showing a lot more aggressive way of trading the same system. Cheers. Jim

My first trade using this method on the 4 hr chart with Gold. Now this might've just been luck but...WOW...currently up over 500 pips. I will update this trade as it continues if any of you might be interested...I thought it would be good to see this on the "hard right edge". I am only positioned with a single microlot just to test the theory but it is a live trade.

gspajon,

You are right, you were probably lucky on this one judging by the bigger than usual candle. But having said that, just looking to the left on that chart, there was a nice down trend that would have provided some good profit. Thanks for taking the time to check the system out and I'm looking forward to see how you manage the trade/s. Cheers.

I am really "antzy" to move the stop up to lock in profits but there is really no clue as to where...I have moved up to break even to eliminate risk...but now holding to see if I get a retrace then reversal back into this move.

I KNOW that if I must pick a spot and move my stop that the market WILL find that stop then continue without me...so I'm (1)avoiding the coffee this AM. (2) looking at other pairs. (3) turning the computer off after this next 4 hr candle updates. (5) Giving my cell phone - with mobile MT4 - to my wife to hide for 24 hrs.

If I really start to jones, I will go for a drive.

Just a quick update. at the close of the current 4 hr candle, (even though I only have 3 lines in play), I can see that price came below the lines and has again moved back inside. Also of note, this close is above the bearish trend line drawn from the high of 8-28-13. I have moved my stop up to the swing low established in this move and added in another mini lot. There are 500+ pips now locked in with the new SAR and an additional risk of 122 pips with the new scale in. Thus a net positive for this trade if it all comes crashing down.

Looking good gspajon, just sit on your hands and let the trade play out. I'm not one to add further to a trade but I would certainly have moved my SAR up to where you have now got it. If that trend line you have marked holds, then it would take you out of the long trade in a nice profit and open a short trade to the downside. However if price did drop and activated the SAR to the short side and reversed and headed back up, then you are only risking from 1358.70 to about 1375.20 to find out, keeping in mind you were long from 1308.90. I'm not a gold trader so I can't really comment on how it moves, but this trade looks good so far.

Also to anyone who maybe waiting on an email from me, I must apologise as in between work and major email/internet issues, I have been a bit slack with responding. But hopefully I'll fix that in the next couple of days. Cheers. Jim

Another update on this trade...the Stop and Reverse (SAR) was triggered overnight on this trade and I am now short with 1 micro lot. Trade is moving away and appears to want to retrace at least 50% of the huge move up. As can be clearly seen this type of back and forth, move-retrace, price movements are common to every instrument. The only difference is the amplitude of the price oscillations.

This method finds those area which tend to occur at tops and bottoms and holds you into the trend that later ensues.

I am quite satisfied with this method and intend to continue forward testing with small position sizes and find a way to add to winners during pull backs.

Thank you again Jim for your generosity in sharing this simple yet powerful method with us.

Hi Jim. What lotsize do you suggest to use when using your 1H 4 lines system. I am now thinking to use 0.01 per $33 of equity. I will start next Monday with 1H EURUSD and 1H EURJPY using my live micro account. Thanks

I looked at this system at h2----awesome. I am in starting Monday.Thank you.

Hey Jim,

Thank you very much for your thorough explanation and for making the video.

I believe you're right that the system is much easier to handle on the H4, especially when trading multiple pairs. I'm going to test it with microlots on GJ, GA and GU, posting the trades here for discussion. Could you please recommend two more pairs in order to create a balanced 5-pair portfolio? There's still a lot I need to learn about correlations and possible ways of hedging, but as you've mentioned the EUR and the CHF, it makes me think that choosing the right pairs might be a crucial factor affecting the bottom line.

Thanks. Jo

gspajon,

Thank you for posting. It's a great lesson to see a live trade develop and how you manage it. Good luck!

Hey guys, thanks for the support. I'm happy that others are getting something out of this system. Remember to make it your own and don't necessarily follow my suggestions. This is just a basic framework. I will be doing another video in the next couple of days showing a more aggressive way of trading this that may suit some. Especially those not that comfortable with the initial big gap between the SAR and point of entry.

istvan, it is hard for me to comment on your suggested lot size without knowing things like your personality ie how you handle risk emotionally, and also what sort of account leverage you have. Might just want to consider trading one pair initially at 0.01 just so you get a feel for it. There is nothing to stop you demoing other pairs at the same time. To give you an idea how we use to trade, trading the 3x pairs, there had to be a min of at least $10K in the account to trade 1.0 lot on each pair. Preferred that there was $15K in the account, which was a much more comfortable size. It is a personal thing though.

I too have been following gspajon's trade with interest, and have actually been communicating with him privately about it. Looks good so far.

I'll get onto that new video soon and I also want to re-activate an old thread of mine from earlier this year that also discusses a SAR method on the 4hr charts. This is a system based on my 2x favourite indicators and really hasn't got anything in common with the method discussed in this thread. Cheers. Jim

Hey guys,

Below is the video I promised. It shows how you can be a little more aggressive with the moving of the SAR level. This will involve some discretion or you may just want to modify the rules to suit. For example, you may wish to stick to the basic rules but instead of using the four yellow lines as the box, you may wish just to use whatever yellow lines are in play, whether there is four or one. You could also add the blue entry line in as a part of your break out box. I personally like the discretionary method if you have the time to watch the charts a bit more closely.

You may even choose to be aggressive up until the point where you are in a no loss situation, and then relax the rules back to the original rules so you give the market room to move. There is really no right way of doing it, keeping in mind you won't get every pip no matter which way you trade. As long as you are overall profitable and it doesn't stress you out in the process, that's what's important.

I also added a couple of my favourite indicators to the chart just to give me an idea of which way the trend is. More of a visual thing really as price is normally good enough for me. You can use any indicators you wish to assist with your trading decisions. They are not necessary but some traders may feel they need their own confirmation to commit to a certain action.

With this trading system, you can always see what your max risk is one trade in advance because your SAR level is set by the previous high/low. So basically you can look at a chart, see what profit you have locked in already, and if the market appears to be turning, you can really jam your SAR up closer to the action. If the market does turn back in the original direction, you won't lose that much on the reversal, and you'll be back in the major trend. Sort of hedging your bets. Like a good chess player who is looking one or two moves into the future. Cheers. Jim