SAR and doji reaction forex strategy

Doji star is a basic chart formation that clearly tells a story of a narrow trading range in lower time frames. It can be exploited by waiting for the breakout (reaction candle) in our timeframe. Candle closing below the low or above the high of doji, will trigger our entry. To increase entry accuracy, trend is accurately described by using two different methods.

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Once we find doji candle with defined size (extremely narrow candle body, close almost equals open), we will wait for development on next candle. If its close surpasses low/high of the doji in the direction of trend we enter the trade. To maximize the trend following capacity, system uses advanced SAR based trail stop.

 

Strategy was tested for profitability on historical data since 2003 (tick 4H EURUSD).

 

Trend is identified with moving averages and SAR indicator.

 

Used tools and indicators

 

Exponential moving averages (EMA 500,250) Position of fast EMA compared to slow will determine uptrend or downtrend. We enter only in the direction of trend.

 

SAR parabolic (max 0,1, step 0,005): trend is confirmed by SAR. Trailing stop is placed and adjusted according to last closed SAR dot.

 

Advanced trailing stop. SAR based Extra deviation is applied to improve the trend following capacity – and profits.

 

Doji candle (maximum size 5 pips). Candle with extremely narrow body (size can be defined). Strategy doesn't discriminate among different types of doji star candles. Once the doji star closes we wait for next candle to close above it high or below its low. If the reaction candle closes in confluence with the trend we enter the trade.

 

Reaction candle (minimum size 10 pips). Reaction candle should be wide and clearly bearish/bullish. In expert inputs, reaction candle size can be defined.

 

Max open trades (5 in test): System can get aggressive by opening more trades per side at the same time. Additional rules are applied.

 

Adding to the winner: If trade exists, new trade can only be opened if account profit is greater than number of trades*10 pips.

 

Forex strategy rules

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SELL

EMA fast trending below EMA slow. Downtrend.

Price closing below the SAR parabolic.

 

Doji star closed. We wait for reaction candle closing below the low of the doji star. Once it closes we enter the trade short, placing trailing stop at last closed SAR dot + extra deviation above.

 

TS is the only method of trade liquidation.

Adding to the winner rules are applied if short trade exists.

 

BUY

EMA fast trending above EMA slow. Uptrend.

Price closing above the SAR parabolic.

 

Doji star closed. We wait for reaction candle closing above the high of the doji star. Once it closes we enter the trade long, placing trailing stop at last closed SAR dot - extra deviation below.

 

TS is the only method of trade liquidation.

Adding to the winner rules are applied if long trade exists.

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Disclaimer:  Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.

 

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