Discussing the article: "MQL5 Wizard Techniques you should know (Part 40): Parabolic SAR"

[MetaQuotes]

Check out the new article: MQL5 Wizard Techniques you should know (Part 40): Parabolic SAR.

The Parabolic Stop-and-Reversal (SAR) is an indicator for trend confirmation and trend termination points. Because it is a laggard in identifying trends its primary purpose has been in positioning trailing stop losses on open positions. We, however, explore if indeed it could be used as an Expert Advisor signal, thanks to custom signal classes of wizard assembled Expert Advisors.

We continue these series that look at the different trade setups and ideas that can be exploited and tested rapidly thanks to the MQL5 wizard. In the last 2 articles we have focused on the very basic indicators and oscillators such as those that come with the wizard classes in the IDE. In doing so, we exploited the various patterns each of the considered indicators can provide, tested it independently and also optimized for settings that use a selection of multiple patterns so we could compare test results of independent pattern runs against a collective, or optimized setting. 

We stick to this format for this article, where we go over pattern by pattern for the parabolic SAR before concluding with a test run that combines multiple patterns as we did in the last articles. The parabolic SAR is computed almost independently with each new bar, since some of the parameters that go into its formula need to be adjusted, as we will see below. This trait, though, makes it very sensitive to price changes and trends in general, which in turn makes the case for its use within a custom signal class. For this article, we are going to explore 10 separate patterns of this indicator by testing each independently and then concluding, as in the recent articles, with a test run that combines a selection of these patterns.

It is worth noting we are dealing with three data buffers here, namely, prices, the moving average, and the SAR. Our chosen deviation from these is between prices and the SAR, however alternative deviations such as between the moving average and the SAR can also be considered. This divergence, though, because of the lagging effects of the moving average, is also bound to be a bit of a laggard when compared to the price-SAR divergence we have implemented for this article. On the flip side, it is also bound to be less noisy, since price-action does produce a lot of action in the short term that often does not become significant over the long run. So, it could have some uses, and the reader is welcome to explore this avenue as well. The input for pattern usage for this pattern is 32.

Author: Stephen Njuki