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  • 6/5/2025
Combining the Parabolic SAR, ADX (Average Directional Index), and moving averages can create a robust and responsive trading strategy that adapts to various market conditions.

Open Account: http://pocketoptioncapital.com

The Parabolic SAR is a trend-following indicator that places dots above or below price to signal potential reversals, making it ideal for identifying exit and entry points. When used in conjunction with moving averages—like the 20 EMA for short-term trends and 50 or 200 SMA for long-term trends—it helps filter out false signals by aligning trades only in the direction of the broader trend.

The ADX indicator, on the other hand, measures trend strength rather than direction. When the ADX value rises above 20 or 25, it indicates a strong trend—an essential filter to avoid whipsaws in sideways markets. When ADX confirms a strong trend and the Parabolic SAR triggers an entry in the same direction as the slope of the moving averages, the setup becomes significantly more reliable. For example, if the 20 EMA is above the 50 SMA, the Parabolic SAR prints a dot below price, and ADX is above 25, a long trade can be considered high probability.

This triple-indicator system also helps with timing exits. If the Parabolic SAR flips direction or ADX starts to decline while price moves sideways, it might signal weakening momentum—an early cue to lock in profits or tighten stops. Meanwhile, moving averages provide dynamic support and resistance levels, helping traders manage risk more effectively. Together, Parabolic SAR, ADX, and moving averages form a powerful trifecta that can help traders identify high-quality trend trades, manage risk, and reduce noise in volatile markets.

Learn how to day trade. This video is dedicated to 'everyday' folks starting out with a smaller account - think $1000 or less. Like starting any career, there is a lot to learn when you're a day trading beginner. Here are some tips to steer you in the right direction as you start your journey. These tips will get you setup with the proper indicators and settings and strategy, help you decide what to trade and when to trade, show you how much capital you need, how to manage risk, and how to practice a day trading strategy effectively.

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.

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Transcript
00:00Hello everyone and right at the beginning of the video like, subscribe to the channel and turn on
00:07notifications so as not to miss new videos. Let's start setting up the strategy. Select
00:12the hiking ashi chart type with a time frame of 30 seconds, expiration time is 2 minutes,
00:17connect parabolic SAR, ADX and 3 moving averages. For parabolic SAR change all the 2's to 3's and
00:26make it bigger. For the first moving average set the period to 5 and make it thicker. For the second
00:32moving average set the period to 8 and repaint it yellow. For the third moving average set the period
00:39to 14 and repaint it blue. For ADX set ADX smoothing to 7 and lens to 9. Also set the style.
00:56At this stage the indicator setup is complete and I can already see a suitable trading situation.
01:02I open a trade to increase and now I will explain how the strategy works. First we look at the
01:07intersection of the moving averages. Two moving averages cross the third from the bottom up.
01:13Secondly the dots of the parabolic SAR indicator are below the chart. Then we look at the ADX indicator,
01:20there we look at the green line. The green line is moving in upward direction.
01:35Still closer with the profit. However, before I continue and I would like to share with you
01:39some useful information. Don't rewind because you can miss opportunities for yourself.
01:44And we continue. Here I open a sell trade. The logic is absolutely opposite to the previous trade.
01:55First, we see a strong downward price impulse. This is the first signal to decrease. Second,
02:00we see a trend of how the moving averages will intersect each other. Two moving averages intersect
02:06the third from top to bottom. This is the second signal that the price will be lower. Third,
02:12the dots of the parabolic SAR indicator are above the chart. Fourth, we see that the green line of the
02:18ADX indicator is directed downward. Still close with the profit again and I continue to look for perhaps
02:34two more deals to consolidate.
02:56Here I open a sell trade again. I'll repeat for consolidation. First, the dots of the parabolic SAR indicator
03:03are above the chart. Second, we see how the moving averages intersect. Two moving averages intersect
03:09the third from top to bottom. This is the second signal that the price will be lower. Third, we see
03:15that the green line of the ADX indicator is directed downwards.
03:19And now I will open a buy deal. I have highlighted this trading pair here in my favorites.
03:49First, the dots of the parabolic SAR indicator are below the chart. Second, we look at the intersection
03:57of the moving averages. Two moving averages cross at the third from the bottom up. Then we look at the
04:04ADX indicator. The green line is moving in an upward direction, despite small fluctuations.
04:19Well, that's the strategy for today. I hope it was useful for you and you'll apply it in your trading.
04:26Thank you very much for watching. Good luck!

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