Parabolic SAR and EMA trading strategy

Strategy template description

The strategy enters long when the trend is bullish and Parabolic SAR crosses below the Close Price.

The strategy exits when the Parabolic SAR goes above the Close Price.

Step 1: Login and click on Create Strategy

Once logged in to the Vestinda app, click Create Strategy from the left menu.

Step 2: Use a strategy Template

Click on Use a Strategy Template from the overlay.

Step 3: Learn how the strategy works 

Once you reach the template page, you have the entire strategy code ready to be used. 

You can see the parameters for each indicator, but also modify the timeframe and all parameters. 

Step 4: Backtest strategy or Demo Trade

Before any execution, backtesting the strategy is the best place to start from. You can do it on thousands of assets and many years of historical data. 

This is helping you learn how to use these indicators, in what market conditions they work best, and what assets to trade using this strategy and indicators. Read more about Backtesting.

Demo Trading is another way to simulate the strategy without risking real money. This allows you to start using the strategy on the market moving forward on any available asset. Read more about Demo Trading.

Step 5: Results

This is the result of backtesting this template on BTCUSDT over a 7 month period from Aug 2022 to Feb 2023. 

With a simple strategy like this, we got an outcome that returned better than the benchmark. Profitability is not great, but adding more filters to the entries can help.

Once you're confident enough, you can start Real Trading.

Indicators in the strategy

Parabolic SAR

Parabolic SAR (Stop and Reverse) is a technical analysis indicator used to determine the direction of an asset's trend and to set stop-loss orders. The Parabolic SAR indicator is represented by a series of dots that appear above or below the price of an asset.

When the dots are below the price, they are indicating a bullish trend, while dots above the price indicate a bearish trend. The dots move closer to the price over time, and if the price crosses the dots, it can be considered a potential trend reversal signal.

The Parabolic SAR is often used in conjunction with other technical analysis indicators to confirm trends and identify entry and exit points for trades. It is a versatile indicator that can be applied to a variety of financial markets, including stocks, commodities, and forex.

EMA (Exponential Moving Average)

Exponential Moving Average (EMA) is a type of moving average that places a higher weight on the more recent data points and is used to identify trends in an asset's price. Unlike a simple moving average, which gives equal weight to all data points in the calculation, an EMA gives more importance to the most recent prices, making it more responsive to recent price changes.

The EMA calculation involves smoothing out the fluctuations in the data by multiplying each data point by a weighting factor and adding the results together. The weighting factor is calculated based on the number of periods in the calculation and the time elapsed since each data point.

EMA is often used in conjunction with other technical indicators to confirm trends, generate signals for buying or selling, and identify potential reversals in an asset's price. It can be used on any type of financial instrument, including stocks, currencies, commodities, and indices.

In summary, the EMA is a type of moving average that gives more weight to recent data points, making it a useful tool for identifying trends and potential price reversals in financial markets.

Congrats! 🎉

This template is inspired by the following video: