Parabolic SAR Reversal Signal

Entry Logic

• Exact Entry Trigger: Look for a Parabolic SAR flip as a potential reversal signal at a key support or resistance level.
• Confirmation: A strong confirmation candle and volume are required.
• Timeframe: 15-minute, 60-minute.
• Market Condition: End of a trend, potential reversal.

Exit Logic

• Profit Targets: Target the next significant support/resistance level.
• Trailing Stop: Trail the stop behind the prior swing low/high.

Stop Loss Structure

• Hard Stop: Place stop beyond the price extreme of the reversal pattern.

Risk Management Framework

• Risk Per Trade: 1% of account capital.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.

Trade Filtering

• Market Conditions to Avoid: Strong trending markets.

Context Framework

• Higher TF Alignment: The reversal should be supported by the higher timeframe context.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.

Time Rules

• Optimal Window: Near the open or close, when reversals are more common.

Setup Classification

• A+ Setup: The SAR flip occurs with a divergence on RSI or MACD.

Market Selection Criteria

• Instruments: Any liquid instrument.

Statistical Edge Metrics

• Win Rate: 45-55%.
• Profit Factor: 1.8.
• Expectancy: 0.4R.

Failure Conditions

• Strategy Fails: When what appears to be a reversal is just a pause in the trend.

Psychological Rules

• Discipline: Avoid trying to pick tops and bottoms; wait for confirmation.

Advanced Components

• Filters: Look for candlestick reversal patterns (e.g., engulfing, hammer) to confirm the SAR signal.

Location

• Strongest: At the exhaustion point of a trend, near a major level.