The Parabolic SAR, also known as PSAR, is a handy indicator to follow a trend. It can also be used in some instances as an entry signal or a trailing stop value. Below you can download a free expert advisor for MetaTrader 4 that uses PSAR indicator to open trades and to move the trailing stop.
Position Size — to define the position size.
Stop-loss in pips — this is the initial stop-loss price; it will be replaced by the trailing stop.
Take-profit in pips.
Slippage in pips.
Enable trade — to enable or disable the trading function.
PSAR Step — the first parameter to calculate PSAR. The default value is 0.2.
PSAR Max Step — the second parameter to calculate PSAR. The default value is 0.02.
Magic Number — lets the EA tell the difference between its own orders and orders not opened by it.
Entry Buy: PSAR switches from above the previous bar to below the current bar.
Entry Sell: PSAR switches from below the previous bar to above the current bar.
Exit: Take-profit or trailing stop using PSAR.
Results on EUR/USD @ H1
Backtesting this expert advisor on the EUR/USD @ 1-hour timeframe shows poor results. Changing the currency pair or the timeframe doesn't change much substantially. It suffers greatly from spread losses due to being always in the market — as one trade is closed a new one is opened.
Can potentially perform well under ideal conditions with clearly defined and long-lasting trends.
Heavily affected by ranging and choppy periods while always keeping some position (either buy or sell) live in the market.
What Is It Good For?
As you can see from the backtesting report, the strategy is too simple to be viable and although it could perform well under ideal conditions of trending market, it cannot perform well under the real conditions of the FX market affected by ranging and choppy periods. It isn't a good idea to use this strategy alone however it could be useful for integration with better signals from other indicators or price action.
This expert advisor is free to download and you can use its .mq4 source file to develop your own EA's.