The Parabolic SAR (stop and reverse) indicator shows bullish and bearish directions of an asset by displaying dots above or below the price bars. When the dot is below the price bar, it means the trend is bullish. And when the dot is above the price bar, it means the trend is bearish.
The strategy is pretty simple to follow: enter long when bullish dots appear at the bottom of the price, exit when the dots flip and appear above the price. Do the opposite for shorting: enter short when bearish dots appear at the top, and exit when the dots appear below.
Parabolic SAR strategy for the SPY on the 30min timeframe
Results
Testing this strategy on the SPY has returned the following profit factors:
- 1min: 0.853
- 5min: 1.132
- 15min: 0.974
- 30min: 1.134
- 1hour: 1.037
- 4hour: 0.974
- 1day: 0.889
- Average: 0.999
This strategy is one of the worst to follow with the average profit factor being less than 1. Remember, different ticker symbols can provide different results.
TradingView Script
Try the Parabolic SAR strategy for yourself on TradingView: https://www.tradingview.com/script/SaKX0wal-Parabolic-SAR-backtestx/
Test with your own tickers and timeframes to see how well it works!