Parabolic Sar, how profitable is it?
  • Parabolic Sar, how profitable is it?

    Joaquin Monfort
    Author: 

    posts: 935, comments: 3

    Parabolic Sar in action on a chart of daily eurodollar

    The Parabolic Sar is an ‘all-in-one’ indicator, a stop-placement guide and a trading system which keeps the trader in the market at all times.

    The guiding principle behind the Parabolic Sar is that it solves a problem which has troubled traders for a long time. This problem is that many existing trend indicators such as moving averages tend to give ‘late’ signals leading to missed profits during a new trend. The Parabolic Sar was developed as a direct attempt to overcome this ‘lag’ element.

    The indicator appears as a series of dots underneath or above the price action, with a dot a certain distance under or over each bar. The dots start quite far away from the price at the at the beginning of a new trend and then move closer, forming a Parabolic-looking gradient. At certain points the dots cross over and move from under to over or vis versa, and this cross marks a reversal in trend.

    The indicator was developed by Welles Wilder, the same analyst who developed the RSI.

    The Parabolic Sar is a little different form other indicators in that it is intended as a complete trading system not just an indicator. When there is a cross-over of the dots and price action a trade is triggered in the direction of the new trend, so when dots move under price a long is triggered and when over, a short is triggered. When new trades are opened, all current open positions are also, obviously automatically liquidated.

    The picture below shows Parabolic Sar in action on a chart of daily eurodollar with its characteristic sloping lines of dots.

    Parabolic Sar in action on a chart of daily eurodollar

    As can be seen on the chart above the system seems to work quite well at a glance, getting the trader in and out of positions in quite a timely fashion, however, if we tested it rigorously, how well does it actually work?

    Lets look at some trading results. Firstly lets take a daily chart of EUR/USD and back-test the Parabolic Sar over the last 12 years , using a standard lot:

    Total Net Profit ($5,887.10) Profit Factor 0.98
    Gross Profit $283,288.30 Gross Loss ($289,175.40)
    Roll Over Credit ($8,220.10)
    Open Position Profit/Loss ($180.00)
    Select Total Net Profit ($14,940.10) Select Profit Factor 0.95
    Select Gross Profit $269,404.30 Select Gross Loss ($284,344.40)
    Adjusted Total Net Profit ($53,890.63) Adjusted Profit Factor 0.83
    Adjusted Gross Profit $256,154.20 Adjusted Gross Loss ($310,044.84)
    Total Number of Trades 301 Percent Profitable 36.21%
    Winning Trades 109 Losing Trades 192
    Even Trades 0
    Avg. Trade Net Profit ($19.56) Ratio Avg. Win:Avg. Loss 1.73
    Avg. Winning Trade $2,598.98 Avg. Losing Trade ($1,506.12)
    Largest Winning Trade $13,884.00 Largest Losing Trade ($4,831.00)
    Largest Winner as % of Gross Profit 4.90% Largest Loser as % of Gross Loss 1.67%
    Net Profit as % of Largest Loss (121.86%)
    Slct. Net Profit as % of Largest Loss (309.25%) Adj. Net Profit as % of Largest Loss (1115.52%)
    Max. Consecutive Winning Trades 5 Max. Consecutive Losing Trades 7
    Avg. Bars in Winning Trades 17.20 Avg. Bars in Losing Trades 7.76
    Avg. Bars in Total Trades 11.18
    Max. Shares/Contracts Held 100000 Account Size Required $32,872.00
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital (5.89%) Annual Rate of Return (0.48%)
    Buy and Hold Return 44.53% Return on Account (17.91%)
    Avg. Monthly Return $102.06 Std. Deviation of Monthly Return $3,565.49
    Return Retracement Ratio (0.02) RINA Index (15.58)
    Sharpe Ratio (0.04) K-Ratio (0.26)
    Trading Period 11 Yrs, 9 Mths, 22 Dys Percent of Time in the Market 99.95%
    Time in the Market 11 Yrs, 9 Mths, 20 Dys Longest Flat Period n/a
    Max. Equity Run-up $43,898.00
    Date of Max. E. Run-up 10/28/08 21:59 Max. E. Run-up as % of Initial Capital 43.90%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($37,111.00) Value ($32,872.00)
    Date 04/27/10 21:59 Date 04/22/10 21:59
    as % of Initial Capital 37.11% as % of Initial Capital 32.87%
    Net Profit as % of Drawdown (15.86%) Net Profit as % of Drawdown (17.91%)
    Slct. Net Profit as % of Drawdown (40.26%) Slct. Net Profit as % of Drawdown (45.45%)
    Adj. Net Prof as % of Drawdown (145.21%) Adj. Net Profit as % of Drawdown (163.94%)
    Max. Trade Drawdown ($4,861.00)
    Long Trades
    Total Net Profit $16,980.50 Profit Factor 1.13
    Gross Profit $151,142.90 Gross Loss ($134,162.40)
    Roll Over Credit ($4,424.50)
    Open Position Profit/Loss ($180.00)
    Select Total Net Profit $16,980.50 Select Profit Factor 1.13
    Select Gross Profit $151,142.90 Select Gross Loss ($134,162.40)
    Adjusted Total Net Profit ($16,760.67) Adjusted Profit Factor 0.89
    Adjusted Gross Profit $131,465.77 Adjusted Gross Loss ($148,226.44)
    Total Number of Trades 150 Percent Profitable 39.33%
    Winning Trades 59 Losing Trades 91
    Even Trades 0
    Avg. Trade Net Profit $113.20 Ratio Avg. Win:Avg. Loss 1.74
    Avg. Winning Trade $2,561.74 Avg. Losing Trade ($1,474.31)
    Largest Winning Trade $9,200.00 Largest Losing Trade ($3,849.00)
    Largest Winner as % of Gross Profit 6.09% Largest Loser as % of Gross Loss 2.87%
    Max. Consecutive Winning Trades 5 Max. Consecutive Losing Trades 9
    Avg. Bars in Winning Trades 17.41 Avg. Bars in Losing Trades 8.45
    Avg. Bars in Total Trades 11.97
    Max. Shares/Contracts Held 100000 Account Size Required $19,318.00
    Total Commission $0.00000 Total Slippage $0.00000
    Net Profit as % of Largest Loss 441.17%
    Slct. Net Profit as % of Largest Loss 441.17% Adj. Net Profit as % of Largest Loss (435.46%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($25,593.00) Value ($19,318.00)
    as % of Initial Capital 25.59% as % of Initial Capital 19.32%
    Net Profit as % of Drawdown 66.35% Net Profit as % of Drawdown 87.90%
    Slct. Net Profit as % of Drawdown 66.35% Slct. Net Profit as % of Drawdown 87.90%
    Adj. Net Prof as % of Drawdown (65.49%) Adj. Net Profit as % of Drawdown 87.90%
    Max. Trade Drawdown ($3,849.00)
    Short Trades
    Total Net Profit ($22,867.60) Profit Factor 0.85
    Gross Profit $132,145.40 Gross Loss ($155,013.00)
    Roll Over Credit ($3,795.60)
    Open Position Profit/Loss $0.00
    Select Total Net Profit ($31,920.60) Select Profit Factor 0.79
    Select Gross Profit $118,261.40 Select Gross Loss ($150,182.00)
    Adjusted Total Net Profit ($56,980.15) Adjusted Profit Factor 0.67
    Adjusted Gross Profit $113,457.22 Adjusted Gross Loss ($170,437.37)
    Total Number of Trades 151 Percent Profitable 33.11%
    Winning Trades 50 Losing Trades 101
    Even Trades 0
    Avg. Trade Net Proft ($151.44) Ratio Avg. Win:Avg. Loss 1.72
    Avg. Winning Trade $2,642.91 Avg. Losing Trade ($1,534.78)
    Largest Winning Trade $13,884.00 Largest Losing Trade ($4,831.00)
    Largest Winner as % of Gross Profit 10.51% Largest Loser as % of Gross Loss 2.87%
    Max. Consecutive Winning Trades 3 Max. Consecutive Losing Trades 11
    Avg. Bars in Winning Trades 16.96 Avg. Bars in Losing Trades 7.13
    Avg. Bars in Total Trades 10.38
    Max. Shares/Contracts Held 100000 Account Size Required $40,171.50
    Total Slippage $0.00000 Total Commission $0.00000
    Net Profit as % of Largest Loss (473.35%)
    Slct. Net Profit as % of Largest Loss (660.75%) Adj. Net Profit as % of Largest Loss (1179.47%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($42,858.50) Value ($40,171.50)
    as % of Initial Capital 42.86% as % of Initial Capital 40.17%
    Net Profit as % of Drawdown (53.36%) Net Profit as % of Drawdown (56.92%)
    Slct. Net Profit as % of Drawdown (74.48%) Slct. Net Profit as % of Drawdown (79.46%)
    Adj. Net Prof as % of Drawdown (132.95%) Adj. Net Prof as % of Drawdown (141.84%)
    Max. Trade Drawdown ($4,861.00)

    On the daily chart Parabolic Sar is not profitable given the $-5887.10 loss, – which doesn’t include trading costs -either. It is not terribly unprofitable either, as the results show that the strategy turned-over a gross profit of $283,288.30, and so the loss was marginal, however, it still failed to make any money.

    Often strategies on daily charts are much more profitable on weekly charts because trends are more predictable, so lets look at the strategy back-tested using the same parameters on the weekly chart:

    Total Net Profit $49,274.00 Profit Factor 1.52
    Gross Profit $143,843.70 Gross Loss ($94,569.70)
    Roll Over Credit ($8,970.00)
    Open Position Profit/Loss ($281.60)
    Select Total Net Profit $25,909.00 Select Profit Factor 1.27
    Select Gross Profit $120,478.70 Select Gross Loss ($94,569.70)
    Adjusted Total Net Profit $1,621.20 Adjusted Profit Factor 1.01
    Adjusted Gross Profit $113,176.12 Adjusted Gross Loss ($111,554.92)
    Total Number of Trades 53 Percent Profitable 41.51%
    Winning Trades 22 Losing Trades 31
    Even Trades 0
    Avg. Trade Net Profit $929.70 Ratio Avg. Win:Avg. Loss 2.14
    Avg. Winning Trade $6,538.35 Avg. Losing Trade ($3,050.64)
    Largest Winning Trade $23,365.00 Largest Losing Trade ($7,916.10)
    Largest Winner as % of Gross Profit 16.24% Largest Loser as % of Gross Loss 8.37%
    Net Profit as % of Largest Loss 622.45%
    Slct. Net Profit as % of Largest Loss 327.30% Adj. Net Profit as % of Largest Loss 20.48%
    Max. Consecutive Winning Trades 4 Max. Consecutive Losing Trades 6
    Avg. Bars in Winning Trades 16.36 Avg. Bars in Losing Trades 8.52
    Avg. Bars in Total Trades 11.77
    Max. Shares/Contracts Held 100000 Account Size Required $23,370.50
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital 49.27% Annual Rate of Return 3.63%
    Buy and Hold Return 49.04% Return on Account 210.84%
    Avg. Monthly Return $86.59 Std. Deviation of Monthly Return $3,944.69
    Return Retracement Ratio 0.11 RINA Index 11.01
    Sharpe Ratio 0.06 K-Ratio 1.62
    Trading Period 11 Yrs, 14 Dys Percent of Time in the Market 99.45%
    Time in the Market 10 Yrs, 11 Mths, 22 Dys Longest Flat Period n/a
    Max. Equity Run-up n/a
    Date of Max. E. Run-up n/a Max. E. Run-up as % of Initial Capital n/a
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($30,615.70) Value ($23,370.50)
    Date n/a Date 12/05/2012
    as % of Initial Capital n/a as % of Initial Capital 23.37%
    Net Profit as % of Drawdown 160.94% Net Profit as % of Drawdown 210.84%
    Slct. Net Profit as % of Drawdown 84.63% Slct. Net Profit as % of Drawdown 110.86%
    Adj. Net Prof as % of Drawdown 5.30% Adj. Net Profit as % of Drawdown 6.94%
    Max. Trade Drawdown ($7,916.10)
    Long Trades
    Total Net Profit $45,679.00 Profit Factor 1.99
    Gross Profit $91,663.40 Gross Loss ($45,984.40)
    Roll Over Credit ($5,091.00)
    Open Position Profit/Loss ($281.60)
    Select Total Net Profit $45,679.00 Select Profit Factor 1.99
    Select Gross Profit $91,663.40 Select Gross Loss ($45,984.40)
    Adjusted Total Net Profit $7,906.37 Adjusted Profit Factor 1.13
    Adjusted Gross Profit $67,165.33 Adjusted Gross Loss ($59,258.95)
    Total Number of Trades 26 Percent Profitable 53.85%
    Winning Trades 14 Losing Trades 12
    Even Trades 0
    Avg. Trade Net Profit $1,756.88 Ratio Avg. Win:Avg. Loss 1.71
    Avg. Winning Trade $6,547.39 Avg. Losing Trade ($3,832.03)
    Largest Winning Trade $13,004.00 Largest Losing Trade ($7,916.10)
    Largest Winner as % of Gross Profit 14.19% Largest Loser as % of Gross Loss 17.21%
    Max. Consecutive Winning Trades 4 Max. Consecutive Losing Trades 3
    Avg. Bars in Winning Trades 17.29 Avg. Bars in Losing Trades 7.42
    Avg. Bars in Total Trades 12.73
    Max. Shares/Contracts Held 100000 Account Size Required $18,881.40
    Total Commission $0.00000 Total Slippage $0.00000
    Net Profit as % of Largest Loss 577.04%
    Slct. Net Profit as % of Largest Loss 577.04% Adj. Net Profit as % of Largest Loss 99.88%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($25,519.30) Value ($18,881.40)
    as % of Initial Capital n/a as % of Initial Capital 18.88%
    Net Profit as % of Drawdown 179.00% Net Profit as % of Drawdown 241.93%
    Slct. Net Profit as % of Drawdown 179.00% Slct. Net Profit as % of Drawdown 241.93%
    Adj. Net Prof as % of Drawdown 30.98% Adj. Net Profit as % of Drawdown 241.93%
    Max. Trade Drawdown ($7,916.10)
    Short Trades
    Total Net Profit $3,595.00 Profit Factor 1.07
    Gross Profit $52,180.30 Gross Loss ($48,585.30)
    Roll Over Credit ($3,879.00)
    Open Position Profit/Loss $0.00
    Select Total Net Profit ($19,770.00) Select Profit Factor 0.59
    Select Gross Profit $28,815.30 Select Gross Loss ($48,585.30)
    Adjusted Total Net Profit ($25,999.75) Adjusted Profit Factor 0.56
    Adjusted Gross Profit $33,731.78 Adjusted Gross Loss ($59,731.53)
    Total Number of Trades 27 Percent Profitable 29.63%
    Winning Trades 8 Losing Trades 19
    Even Trades 0
    Avg. Trade Net Proft $133.15 Ratio Avg. Win:Avg. Loss 2.55
    Avg. Winning Trade $6,522.54 Avg. Losing Trade ($2,557.12)
    Largest Winning Trade $23,365.00 Largest Losing Trade ($4,669.00)
    Largest Winner as % of Gross Profit 44.78% Largest Loser as % of Gross Loss 17.21%
    Max. Consecutive Winning Trades 3 Max. Consecutive Losing Trades 7
    Avg. Bars in Winning Trades 14.75 Avg. Bars in Losing Trades 9.21
    Avg. Bars in Total Trades 10.85
    Max. Shares/Contracts Held 100000 Account Size Required $22,803.00
    Total Slippage $0.00000 Total Commission $0.00000
    Net Profit as % of Largest Loss 77.00%
    Slct. Net Profit as % of Largest Loss (423.43%) Adj. Net Profit as % of Largest Loss (556.86%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($26,126.00) Value ($22,803.00)
    as % of Initial Capital n/a as % of Initial Capital 22.80%
    Net Profit as % of Drawdown 13.76% Net Profit as % of Drawdown 15.77%
    Slct. Net Profit as % of Drawdown (75.67%) Slct. Net Profit as % of Drawdown (86.70%)
    Adj. Net Prof as % of Drawdown (99.52%) Adj. Net Prof as % of Drawdown (114.02%)
    Max. Trade Drawdown ($7,707.00)

    On a weekly chart it is much more profitable generating a substantial profit of $49,274.00 from a total of $143,843.70. The profit factor of 1.52 is also pretty good.

    Now lets look at short time-frames – how well does the strategy work on intra-day charts?

    First lets look at the strategy’s performance back-tested on 4-hour data.

    Total Net Profit $49,626.70 Profit Factor 1.09
    Gross Profit $620,066.30 Gross Loss ($570,439.60)
    Roll Over Credit ($7,917.30)
    Open Position Profit/Loss ($220.00)
    Select Total Net Profit $27,332.80 Select Profit Factor 1.05
    Select Gross Profit $576,269.30 Select Gross Loss ($548,936.50)
    Adjusted Total Net Profit $3,121.66 Adjusted Profit Factor 1.01
    Adjusted Gross Profit $593,208.25 Adjusted Gross Loss ($590,086.58)
    Total Number of Trades 1376 Percent Profitable 38.74%
    Winning Trades 533 Losing Trades 843
    Even Trades 0
    Avg. Trade Net Profit $36.07 Ratio Avg. Win:Avg. Loss 1.72
    Avg. Winning Trade $1,163.35 Avg. Losing Trade ($676.68)
    Largest Winning Trade $9,440.00 Largest Losing Trade ($2,424.00)
    Largest Winner as % of Gross Profit 1.52% Largest Loser as % of Gross Loss 0.42%
    Net Profit as % of Largest Loss 2047.31%
    Slct. Net Profit as % of Largest Loss 1127.59% Adj. Net Profit as % of Largest Loss 128.78%
    Max. Consecutive Winning Trades 7 Max. Consecutive Losing Trades 14
    Avg. Bars in Winning Trades 19.17 Avg. Bars in Losing Trades 8.14
    Avg. Bars in Total Trades 12.41
    Max. Shares/Contracts Held 100000 Account Size Required $31,041.20
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital 49.63% Annual Rate of Return 3.98%
    Buy and Hold Return 30.95% Return on Account 159.87%
    Avg. Monthly Return $355.52 Std. Deviation of Monthly Return $4,422.82
    Return Retracement Ratio 0.12 RINA Index 10.65
    Sharpe Ratio 0.07 K-Ratio n/a
    Trading Period 10 Yrs, 1 Mth, 11 Dys, 20 Hrs Percent of Time in the Market 99.86%
    Time in the Market 10 Yrs, 1 Mth, 6 Dys, 12 Hrs Longest Flat Period n/a
    Max. Equity Run-up $77,015.60
    Date of Max. E. Run-up 07/22/11 02:00 Max. E. Run-up as % of Initial Capital 77.02%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($32,721.20) Value ($31,041.20)
    Date 11/01/12 14:00 Date 11/01/12 10:00
    as % of Initial Capital 32.72% as % of Initial Capital 31.04%
    Net Profit as % of Drawdown 151.67% Net Profit as % of Drawdown 159.87%
    Slct. Net Profit as % of Drawdown 83.53% Slct. Net Profit as % of Drawdown 88.05%
    Adj. Net Prof as % of Drawdown 9.54% Adj. Net Profit as % of Drawdown 10.06%
    Max. Trade Drawdown ($2,511.00)
    Long Trades
    Total Net Profit $39,890.90 Profit Factor 1.15
    Gross Profit $309,471.70 Gross Loss ($269,580.80)
    Roll Over Credit ($4,222.10)
    Open Position Profit/Loss $0.00
    Select Total Net Profit $31,989.30 Select Profit Factor 1.12
    Select Gross Profit $289,092.70 Select Gross Loss ($257,103.40)
    Adjusted Total Net Profit $8,033.40 Adjusted Profit Factor 1.03
    Adjusted Gross Profit $290,944.11 Adjusted Gross Loss ($282,910.71)
    Total Number of Trades 688 Percent Profitable 40.55%
    Winning Trades 279 Losing Trades 409
    Even Trades 0
    Avg. Trade Net Profit $57.98 Ratio Avg. Win:Avg. Loss 1.68
    Avg. Winning Trade $1,109.22 Avg. Losing Trade ($659.12)
    Largest Winning Trade $9,440.00 Largest Losing Trade ($2,317.00)
    Largest Winner as % of Gross Profit 3.05% Largest Loser as % of Gross Loss 0.86%
    Max. Consecutive Winning Trades 5 Max. Consecutive Losing Trades 14
    Avg. Bars in Winning Trades 19.51 Avg. Bars in Losing Trades 8.36
    Avg. Bars in Total Trades 12.88
    Max. Shares/Contracts Held 100000 Account Size Required $24,659.80
    Total Commission $0.00000 Total Slippage $0.00000
    Net Profit as % of Largest Loss 1721.66%
    Slct. Net Profit as % of Largest Loss 1380.63% Adj. Net Profit as % of Largest Loss 346.72%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($26,034.70) Value ($24,659.80)
    as % of Initial Capital 26.03% as % of Initial Capital 24.66%
    Net Profit as % of Drawdown 153.22% Net Profit as % of Drawdown 161.76%
    Slct. Net Profit as % of Drawdown 122.87% Slct. Net Profit as % of Drawdown 129.72%
    Adj. Net Prof as % of Drawdown 30.86% Adj. Net Profit as % of Drawdown 129.72%
    Max. Trade Drawdown ($2,317.00)
    Short Trades
    Total Net Profit $9,735.80 Profit Factor 1.03
    Gross Profit $310,594.60 Gross Loss ($300,858.80)
    Roll Over Credit ($3,695.20)
    Open Position Profit/Loss ($220.00)
    Select Total Net Profit ($4,656.50) Select Profit Factor 0.98
    Select Gross Profit $287,176.60 Select Gross Loss ($291,833.10)
    Adjusted Total Net Profit ($24,194.32) Adjusted Profit Factor 0.92
    Adjusted Gross Profit $291,106.16 Adjusted Gross Loss ($315,300.48)
    Total Number of Trades 688 Percent Profitable 36.92%
    Winning Trades 254 Losing Trades 434
    Even Trades 0
    Avg. Trade Net Proft $14.15 Ratio Avg. Win:Avg. Loss 1.76
    Avg. Winning Trade $1,222.81 Avg. Losing Trade ($693.22)
    Largest Winning Trade $4,956.00 Largest Losing Trade ($2,424.00)
    Largest Winner as % of Gross Profit 1.60% Largest Loser as % of Gross Loss 0.86%
    Max. Consecutive Winning Trades 7 Max. Consecutive Losing Trades 12
    Avg. Bars in Winning Trades 18.80 Avg. Bars in Losing Trades 7.93
    Avg. Bars in Total Trades 11.94
    Max. Shares/Contracts Held 100000 Account Size Required $24,748.00
    Total Slippage $0.00000 Total Commission $0.00000
    Net Profit as % of Largest Loss 401.64%
    Slct. Net Profit as % of Largest Loss (192.10%) Adj. Net Profit as % of Largest Loss (998.12%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($26,110.00) Value ($24,748.00)
    as % of Initial Capital 26.11% as % of Initial Capital 24.75%
    Net Profit as % of Drawdown 37.29% Net Profit as % of Drawdown 39.34%
    Slct. Net Profit as % of Drawdown (17.83%) Slct. Net Profit as % of Drawdown (18.82%)
    Adj. Net Prof as % of Drawdown (92.66%) Adj. Net Prof as % of Drawdown (97.76%)
    Max. Trade Drawdown ($2,511.00)

    The data from back-testing Parabolic Sar on the 4-hour chart shows the strategy is profitable , with a $49,626.70 profit versus $620,066.20 total profit.

    This also indicates that the strategy does not necessarily deteriorate on smaller time-frames as it did going down from the weekly to the daily.

    Despite being profitable on a 4-hour chart the strategy was not as profitable as it was on the weekly chart which showed an approx 49k return from 143k gross when the 4hr only showed a 49k return from 643k gross.

    Finally now lets look at the hourly chart:

    Total Net Profit $121,585.40 Profit Factor 1.11
    Gross Profit $1,193,742.70 Gross Loss ($1,072,157.30)
    Roll Over Credit ($7,615.60)
    Open Position Profit/Loss ($176.00)
    Select Total Net Profit $88,089.20 Select Profit Factor 1.09
    Select Gross Profit $1,102,826.40 Select Gross Loss ($1,014,737.20)
    Adjusted Total Net Profit $76,054.80 Adjusted Profit Factor 1.07
    Adjusted Gross Profit $1,166,935.63 Adjusted Gross Loss ($1,090,880.83)
    Total Number of Trades 5266 Percent Profitable 37.66%
    Winning Trades 1983 Losing Trades 3279
    Even Trades 4
    Avg. Trade Net Profit $23.09 Ratio Avg. Win:Avg. Loss 1.84
    Avg. Winning Trade $601.99 Avg. Losing Trade ($326.98)
    Largest Winning Trade $5,775.00 Largest Losing Trade ($2,437.00)
    Largest Winner as % of Gross Profit 0.48% Largest Loser as % of Gross Loss 0.23%
    Net Profit as % of Largest Loss 4989.14%
    Slct. Net Profit as % of Largest Loss 3614.66% Adj. Net Profit as % of Largest Loss 3120.84%
    Max. Consecutive Winning Trades 8 Max. Consecutive Losing Trades 13
    Avg. Bars in Winning Trades 20.17 Avg. Bars in Losing Trades 8.57
    Avg. Bars in Total Trades 12.94
    Max. Shares/Contracts Held 100000 Account Size Required $36,196.00
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital 121.59% Annual Rate of Return 7.85%
    Buy and Hold Return 33.94% Return on Account 335.91%
    Avg. Monthly Return $477.86 Std. Deviation of Monthly Return $3,851.59
    Return Retracement Ratio 0.18 RINA Index 111.11
    Sharpe Ratio 0.24 K-Ratio n/a
    Trading Period 10 Yrs, 1 Mth, 20 Dys, 5 Hrs Percent of Time in the Market 99.99%
    Time in the Market 10 Yrs, 1 Mth, 20 Dys Longest Flat Period n/a
    Max. Equity Run-up $122,668.70
    Date of Max. E. Run-up 12/12/12 18:00 Max. E. Run-up as % of Initial Capital 122.67%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($38,424.00) Value ($36,196.00)
    Date 02/15/10 07:00 Date 02/16/10 16:00
    as % of Initial Capital 38.42% as % of Initial Capital 36.20%
    Net Profit as % of Drawdown 316.43% Net Profit as % of Drawdown 335.91%
    Slct. Net Profit as % of Drawdown 229.26% Slct. Net Profit as % of Drawdown 243.37%
    Adj. Net Prof as % of Drawdown 197.94% Adj. Net Profit as % of Drawdown 210.12%
    Max. Trade Drawdown ($2,437.00)
    Long Trades
    Total Net Profit $77,116.30 Profit Factor 1.15
    Gross Profit $605,418.90 Gross Loss ($528,302.60)
    Roll Over Credit ($3,961.70)
    Open Position Profit/Loss $0.00
    Select Total Net Profit $50,031.80 Select Profit Factor 1.10
    Select Gross Profit $557,501.10 Select Gross Loss ($507,469.30)
    Adjusted Total Net Profit $44,939.16 Adjusted Profit Factor 1.08
    Adjusted Gross Profit $586,359.45 Adjusted Gross Loss ($541,420.29)
    Total Number of Trades 2633 Percent Profitable 38.32%
    Winning Trades 1009 Losing Trades 1622
    Even Trades 2
    Avg. Trade Net Profit $29.29 Ratio Avg. Win:Avg. Loss 1.84
    Avg. Winning Trade $600.02 Avg. Losing Trade ($325.71)
    Largest Winning Trade $5,775.00 Largest Losing Trade ($2,029.00)
    Largest Winner as % of Gross Profit 0.95% Largest Loser as % of Gross Loss 0.38%
    Max. Consecutive Winning Trades 7 Max. Consecutive Losing Trades 13
    Avg. Bars in Winning Trades 20.51 Avg. Bars in Losing Trades 8.59
    Avg. Bars in Total Trades 13.16
    Max. Shares/Contracts Held 100000 Account Size Required $25,953.00
    Total Commission $0.00000 Total Slippage $0.00000
    Net Profit as % of Largest Loss 3800.70%
    Slct. Net Profit as % of Largest Loss 2465.84% Adj. Net Profit as % of Largest Loss 2214.84%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($27,159.00) Value ($25,953.00)
    as % of Initial Capital 27.16% as % of Initial Capital 25.95%
    Net Profit as % of Drawdown 283.94% Net Profit as % of Drawdown 297.14%
    Slct. Net Profit as % of Drawdown 184.22% Slct. Net Profit as % of Drawdown 192.78%
    Adj. Net Prof as % of Drawdown 165.47% Adj. Net Profit as % of Drawdown 192.78%
    Max. Trade Drawdown ($2,029.00)
    Short Trades
    Total Net Profit $44,469.10 Profit Factor 1.08
    Gross Profit $588,323.80 Gross Loss ($543,854.70)
    Roll Over Credit ($3,653.90)
    Open Position Profit/Loss ($176.00)
    Select Total Net Profit $38,057.40 Select Profit Factor 1.08
    Select Gross Profit $545,325.30 Select Gross Loss ($507,267.90)
    Adjusted Total Net Profit $12,257.52 Adjusted Profit Factor 1.02
    Adjusted Gross Profit $569,472.69 Adjusted Gross Loss ($557,215.17)
    Total Number of Trades 2633 Percent Profitable 36.99%
    Winning Trades 974 Losing Trades 1657
    Even Trades 2
    Avg. Trade Net Proft $16.89 Ratio Avg. Win:Avg. Loss 1.84
    Avg. Winning Trade $604.03 Avg. Losing Trade ($328.22)
    Largest Winning Trade $5,546.00 Largest Losing Trade ($2,437.00)
    Largest Winner as % of Gross Profit 0.94% Largest Loser as % of Gross Loss 0.38%
    Max. Consecutive Winning Trades 8 Max. Consecutive Losing Trades 19
    Avg. Bars in Winning Trades 19.82 Avg. Bars in Losing Trades 8.55
    Avg. Bars in Total Trades 12.72
    Max. Shares/Contracts Held 100000 Account Size Required $21,321.00
    Total Slippage $0.00000 Total Commission $0.00000
    Net Profit as % of Largest Loss 1824.75%
    Slct. Net Profit as % of Largest Loss 1561.65% Adj. Net Profit as % of Largest Loss 502.98%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($22,338.00) Value ($21,321.00)
    as % of Initial Capital 22.34% as % of Initial Capital 21.32%
    Net Profit as % of Drawdown 199.07% Net Profit as % of Drawdown 208.57%
    Slct. Net Profit as % of Drawdown 170.37% Slct. Net Profit as % of Drawdown 178.50%
    Adj. Net Prof as % of Drawdown 54.87% Adj. Net Prof as % of Drawdown 57.49%
    Max. Trade Drawdown ($2,437.00)

    The strategy back-tested on an hourly chart it turns out is slightly more profitable compared to a 4-hour chart. The hourly gave a return of 121k from 1.193m, with a profit factor of 1.11 when on the 4-hr the profit factor was lower at only 1.09, however, trading costs would be higher using the shorter time-frame.

    Enhancements

    The strategy is successful on most time-frames, however, is there any way of making it better?

    According the well-known technical analyst Martin Pring the best way to use the Parabolic Sar is by trading it in the direction of the longer-term trend only, therefore, if in an up-trend only the long signals are taken and if in a down-trend only the short signals are taken.

    The next question is how to define the larger trend? There are a variety of ways but let us try with a classic moving average, the simple 200-period MA. Lets look at the results for the different time-frames with the addition of the 200-period rule.

    Below are the results of trading the Parabolic Sar over the last 12-years, only makes long trades, when price is above the 200-day MA, and not making short trades at all:

    Total Net Profit $19,934.80 Profit Factor 1.27
    Gross Profit $93,482.80 Gross Loss ($73,548.00)
    Roll Over Credit ($2,738.20)
    Open Position Profit/Loss $730.30
    Select Total Net Profit $19,934.80 Select Profit Factor 1.27
    Select Gross Profit $93,482.80 Select Gross Loss ($73,548.00)
    Adjusted Total Net Profit ($5,732.46) Adjusted Profit Factor 0.93
    Adjusted Gross Profit $78,114.32 Adjusted Gross Loss ($83,846.78)
    Total Number of Trades 88 Percent Profitable 42.05%
    Winning Trades 37 Losing Trades 51
    Even Trades 0
    Avg. Trade Net Profit $226.53 Ratio Avg. Win:Avg. Loss 1.75
    Avg. Winning Trade $2,526.56 Avg. Losing Trade ($1,442.12)
    Largest Winning Trade $7,391.00 Largest Losing Trade ($3,849.00)
    Largest Winner as % of Gross Profit 7.91% Largest Loser as % of Gross Loss 5.23%
    Max. Consecutive Winning Trades 5 Max. Consecutive Losing Trades 8
    Avg. Bars in Winning Trades 17.92 Avg. Bars in Losing Trades 8.51
    Avg. Bars in Total Trades 12.47
    Max. Shares/Contracts Held 100000 Account Size Required $14,463.00
    Total Commission $0.00000 Total Slippage $0.00000
    Net Profit as % of Largest Loss 517.92%
    Slct. Net Profit as % of Largest Loss 517.92% Adj. Net Profit as % of Largest Loss (148.93%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($19,210.00) Value ($14,463.00)
    as % of Initial Capital 19.21% as % of Initial Capital 14.46%
    Net Profit as % of Drawdown 103.77% Net Profit as % of Drawdown 137.83%
    Slct. Net Profit as % of Drawdown 103.77% Slct. Net Profit as % of Drawdown 137.83%
    Adj. Net Prof as % of Drawdown (29.84%) Adj. Net Profit as % of Drawdown 137.83%
    Max. Trade Drawdown ($3,849.00)

    In most ways, the addition of the 200-day moving average improves the profitability of the strategy, which actually starts to make a profit rather than a loss on the daily chart, with a profit factor of 1.27.

    Now lets test the same strategy on the 4-hour chart:

    Total Net Profit $32,455.30 Profit Factor 1.25
    Gross Profit $162,151.00 Gross Loss ($129,695.70)
    Roll Over Credit ($2,143.70)
    Open Position Profit/Loss $1,784.40
    Select Total Net Profit $23,015.30 Select Profit Factor 1.18
    Select Gross Profit $152,711.00 Select Gross Loss ($129,695.70)
    Adjusted Total Net Profit $9,631.11 Adjusted Profit Factor 1.07
    Adjusted Gross Profit $148,638.42 Adjusted Gross Loss ($139,007.31)
    Total Number of Trades 338 Percent Profitable 42.60%
    Winning Trades 144 Losing Trades 194
    Even Trades 0
    Avg. Trade Net Profit $96.02 Ratio Avg. Win:Avg. Loss 1.68
    Avg. Winning Trade $1,126.05 Avg. Losing Trade ($668.53)
    Largest Winning Trade $9,440.00 Largest Losing Trade ($2,239.40)
    Largest Winner as % of Gross Profit 5.82% Largest Loser as % of Gross Loss 1.73%
    Max. Consecutive Winning Trades 5 Max. Consecutive Losing Trades 11
    Avg. Bars in Winning Trades 20.19 Avg. Bars in Losing Trades 8.57
    Avg. Bars in Total Trades 13.52
    Max. Shares/Contracts Held 100000 Account Size Required $17,911.50
    Total Commission $0.00000 Total Slippage $0.00000
    Net Profit as % of Largest Loss 1449.29%
    Slct. Net Profit as % of Largest Loss 1027.74% Adj. Net Profit as % of Largest Loss 430.08%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($18,805.20) Value ($17,911.50)
    as % of Initial Capital 18.81% as % of Initial Capital 17.91%
    Net Profit as % of Drawdown 172.59% Net Profit as % of Drawdown 181.20%
    Slct. Net Profit as % of Drawdown 122.39% Slct. Net Profit as % of Drawdown 128.49%
    Adj. Net Prof as % of Drawdown 51.22% Adj. Net Profit as % of Drawdown 128.49%
    Max. Trade Drawdown ($2,239.40)

    Lets look at the daily chart again but only trading short below the 200-day and not trading long at all:

    Total Net Profit $3,260.30 Profit Factor 1.06
    Gross Profit $56,045.70 Gross Loss ($52,785.40)
    Roll Over Credit ($1,413.70)
    Open Position Profit/Loss $0.00
    Select Total Net Profit $3,260.30 Select Profit Factor 1.06
    Select Gross Profit $56,045.70 Select Gross Loss ($52,785.40)
    Adjusted Total Net Profit ($20,691.18) Adjusted Profit Factor 0.67
    Adjusted Gross Profit $41,574.76 Adjusted Gross Loss ($62,265.94)
    Total Number of Trades 46 Percent Profitable 32.61%
    Winning Trades 15 Losing Trades 31
    Even Trades 0
    Avg. Trade Net Proft $70.88 Ratio Avg. Win:Avg. Loss 2.19
    Avg. Winning Trade $3,736.38 Avg. Losing Trade ($1,702.75)
    Largest Winning Trade $13,884.00 Largest Losing Trade ($4,831.00)
    Largest Winner as % of Gross Profit 24.77% Largest Loser as % of Gross Loss 8.08%
    Max. Consecutive Winning Trades 2 Max. Consecutive Losing Trades 7
    Avg. Bars in Winning Trades 17.53 Avg. Bars in Losing Trades 7.65
    Avg. Bars in Total Trades 10.87
    Max. Shares/Contracts Held 100000 Account Size Required $14,169.50
    Total Slippage $0.00000 Total Commission $0.00000
    Net Profit as % of Largest Loss 67.49%
    Slct. Net Profit as % of Largest Loss 67.49% Adj. Net Profit as % of Largest Loss (428.30%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($17,256.50) Value ($14,169.50)
    as % of Initial Capital 17.26% as % of Initial Capital 14.17%
    Net Profit as % of Drawdown 18.89% Net Profit as % of Drawdown 23.01%
    Slct. Net Profit as % of Drawdown 18.89% Slct. Net Profit as % of Drawdown 23.01%
    Adj. Net Prof as % of Drawdown (119.90%) Adj. Net Prof as % of Drawdown (146.03%)
    Max. Trade Drawdown ($4,861.00)

    Shorting makes substantially less money compared to using the indicator to go long. Now lets look at the same strategy on the 4-hour:

    Total Net Profit $17,621.10 Profit Factor 1.15
    Gross Profit $138,264.70 Gross Loss ($120,643.60)
    Roll Over Credit ($1,859.90)
    Open Position Profit/Loss $0.00
    Select Total Net Profit $22,433.80 Select Profit Factor 1.19
    Select Gross Profit $138,264.70 Select Gross Loss ($115,830.90)
    Adjusted Total Net Profit ($4,951.94) Adjusted Profit Factor 0.96
    Adjusted Gross Profit $125,141.20 Adjusted Gross Loss ($130,093.14)
    Total Number of Trades 274 Percent Profitable 40.51%
    Winning Trades 111 Losing Trades 163
    Even Trades 0
    Avg. Trade Net Proft $64.31 Ratio Avg. Win:Avg. Loss 1.68
    Avg. Winning Trade $1,245.63 Avg. Losing Trade ($740.14)
    Largest Winning Trade $4,814.00 Largest Losing Trade ($2,424.00)
    Largest Winner as % of Gross Profit 3.48% Largest Loser as % of Gross Loss 2.22%
    Max. Consecutive Winning Trades 7 Max. Consecutive Losing Trades 8
    Avg. Bars in Winning Trades 18.71 Avg. Bars in Losing Trades 8.54
    Avg. Bars in Total Trades 12.66
    Max. Shares/Contracts Held 100000 Account Size Required $16,772.00
    Total Slippage $0.00000 Total Commission $0.00000
    Net Profit as % of Largest Loss 726.94%
    Slct. Net Profit as % of Largest Loss 925.49% Adj. Net Profit as % of Largest Loss (204.29%)
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($17,735.00) Value ($16,772.00)
    as % of Initial Capital 17.74% as % of Initial Capital 16.77%
    Net Profit as % of Drawdown 99.36% Net Profit as % of Drawdown 105.06%
    Slct. Net Profit as % of Drawdown 126.49% Slct. Net Profit as % of Drawdown 133.76%
    Adj. Net Prof as % of Drawdown (27.92%) Adj. Net Prof as % of Drawdown (29.53%)
    Max. Trade Drawdown ($2,511.00)

    A little bit of an improvement but still not as profitable as going long.

    Further Enhancements

    Apart from the 200-day MA used as a filter, there are further enhancements we can test on the strategy. For example, one simple such optimization could be to only open long positions if the bar previous to the trigger bar confirmed the trend – ie green if opening a long trade and red if opening a short trade.

    If the bar before the trigger bar was the opposite colour to the direction of the trend – ie red in the case of a long signal and green in the case then no trade would be taken.

    The diagram below illustrates some examples of the enhancement so as to give a clear idea of how it works:

    The diagram illustrates some examples of the enhancement of parabolic sar

    Now lets look at how successful the strategy is when back-tested as a trading model, firstly on a daily chart, back-tested on our 12-year EUR/USD data:

    Total Net Profit $49,945.50 Profit Factor 1.25
    Gross Profit $247,448.90 Gross Loss ($197,503.40)
    Roll Over Credit ($7,468.50)
    Open Position Profit/Loss $1,010.60
    Select Total Net Profit $45,273.50 Select Profit Factor 1.26
    Select Gross Profit $219,527.90 Select Gross Loss ($174,254.40)
    Adjusted Total Net Profit $2,874.67 Adjusted Profit Factor 1.01
    Adjusted Gross Profit $218,875.96 Adjusted Gross Loss ($216,001.29)
    Total Number of Trades 189 Percent Profitable 39.68%
    Winning Trades 75 Losing Trades 114
    Even Trades 0
    Avg. Trade Net Profit $264.26 Ratio Avg. Win:Avg. Loss 1.90
    Avg. Winning Trade $3,299.32 Avg. Losing Trade ($1,732.49)
    Largest Winning Trade $14,037.00 Largest Losing Trade ($8,874.00)
    Largest Winner as % of Gross Profit 5.67% Largest Loser as % of Gross Loss 4.49%
    Net Profit as % of Largest Loss 562.83%
    Slct. Net Profit as % of Largest Loss 510.18% Adj. Net Profit as % of Largest Loss 32.39%
    Max. Consecutive Winning Trades 6 Max. Consecutive Losing Trades 6
    Avg. Bars in Winning Trades 22.76 Avg. Bars in Losing Trades 12.18
    Avg. Bars in Total Trades 16.38
    Max. Shares/Contracts Held 100000 Account Size Required $34,375.00
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital 49.95% Annual Rate of Return 3.61%
    Buy and Hold Return 44.98% Return on Account 145.30%
    Avg. Monthly Return $421.83 Std. Deviation of Monthly Return $3,636.28
    Return Retracement Ratio 0.07 RINA Index 14.52
    Sharpe Ratio 0.06 K-Ratio 1.37
    Trading Period 11 Yrs, 2 Mths, 24 Dys Percent of Time in the Market 99.90%
    Time in the Market 11 Yrs, 2 Mths, 20 Dys Longest Flat Period n/a
    Max. Equity Run-up $93,464.70
    Date of Max. E. Run-up 09/17/12 21:59 Max. E. Run-up as % of Initial Capital 93.46%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($37,992.00) Value ($34,375.00)
    Date 07/16/04 21:59 Date 08/06/04 21:59
    as % of Initial Capital 37.99% as % of Initial Capital 34.38%
    Net Profit as % of Drawdown 131.46% Net Profit as % of Drawdown 145.30%
    Slct. Net Profit as % of Drawdown 119.17% Slct. Net Profit as % of Drawdown 131.70%
    Adj. Net Prof as % of Drawdown 7.57% Adj. Net Profit as % of Drawdown 8.36%
    Max. Trade Drawdown ($9,314.00)

    This enhancement appears to radically improve the performance of the strategy on the daily chart. Below are the results trading the strategy on a 4-hour chart:

    Total Net Profit $75,709.50 Profit Factor 1.19
    Gross Profit $474,610.60 Gross Loss ($398,901.10)
    Roll Over Credit ($7,345.50)
    Open Position Profit/Loss $1,103.90
    Select Total Net Profit $68,546.70 Select Profit Factor 1.19
    Select Gross Profit $429,160.00 Select Gross Loss ($360,613.30)
    Adjusted Total Net Profit $30,346.95 Adjusted Profit Factor 1.07
    Adjusted Gross Profit $448,243.34 Adjusted Gross Loss ($417,896.39)
    Total Number of Trades 765 Percent Profitable 42.35%
    Winning Trades 324 Losing Trades 441
    Even Trades 0
    Avg. Trade Net Profit $98.97 Ratio Avg. Win:Avg. Loss 1.62
    Avg. Winning Trade $1,464.85 Avg. Losing Trade ($904.54)
    Largest Winning Trade $9,440.00 Largest Losing Trade ($8,269.00)
    Largest Winner as % of Gross Profit 1.99% Largest Loser as % of Gross Loss 2.07%
    Net Profit as % of Largest Loss 915.58%
    Slct. Net Profit as % of Largest Loss 828.96% Adj. Net Profit as % of Largest Loss 367.00%
    Max. Consecutive Winning Trades 6 Max. Consecutive Losing Trades 10
    Avg. Bars in Winning Trades 30.15 Avg. Bars in Losing Trades 14.91
    Avg. Bars in Total Trades 21.36
    Max. Shares/Contracts Held 100000 Account Size Required $28,500.00
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital 75.71% Annual Rate of Return 5.62%
    Buy and Hold Return 32.05% Return on Account 265.65%
    Avg. Monthly Return $687.31 Std. Deviation of Monthly Return $3,781.88
    Return Retracement Ratio 0.15 RINA Index 38.69
    Sharpe Ratio 0.14 K-Ratio n/a
    Trading Period 10 Yrs, 12 Dys, 8 Hrs Percent of Time in the Market 100.00%
    Time in the Market 10 Yrs, 12 Dys, 4 Hrs Longest Flat Period n/a
    Max. Equity Run-up $94,753.50
    Date of Max. E. Run-up 02/14/11 14:00 Max. E. Run-up as % of Initial Capital 94.75%
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($29,918.00) Value ($28,500.00)
    Date 08/03/07 10:00 Date 08/03/07 02:00
    as % of Initial Capital 29.92% as % of Initial Capital 28.50%
    Net Profit as % of Drawdown 253.06% Net Profit as % of Drawdown 265.65%
    Slct. Net Profit as % of Drawdown 229.12% Slct. Net Profit as % of Drawdown 240.51%
    Adj. Net Prof as % of Drawdown 101.43% Adj. Net Profit as % of Drawdown 106.48%
    Max. Trade Drawdown ($8,269.00)
    Long Trades

    Not bad either. Finally below are the results on a weekly chart:

    Total Net Profit $42,869.80 Profit Factor 1.78
    Gross Profit $97,953.80 Gross Loss ($55,084.00)
    Roll Over Credit ($8,215.20)
    Open Position Profit/Loss $1,169.00
    Select Total Net Profit $42,869.80 Select Profit Factor 1.78
    Select Gross Profit $97,953.80 Select Gross Loss ($55,084.00)
    Adjusted Total Net Profit ($2,328.54) Adjusted Profit Factor 0.97
    Adjusted Gross Profit $66,978.09 Adjusted Gross Loss ($69,306.63)
    Total Number of Trades 25 Percent Profitable 40.00%
    Winning Trades 10 Losing Trades 15
    Even Trades 0
    Avg. Trade Net Profit $1,714.79 Ratio Avg. Win:Avg. Loss 2.67
    Avg. Winning Trade $9,795.38 Avg. Losing Trade ($3,672.27)
    Largest Winning Trade $19,254.00 Largest Losing Trade ($8,685.00)
    Largest Winner as % of Gross Profit 19.66% Largest Loser as % of Gross Loss 15.77%
    Net Profit as % of Largest Loss 493.61%
    Slct. Net Profit as % of Largest Loss 493.61% Adj. Net Profit as % of Largest Loss (26.81%)
    Max. Consecutive Winning Trades 4 Max. Consecutive Losing Trades 4
    Avg. Bars in Winning Trades 28.80 Avg. Bars in Losing Trades 13.00
    Avg. Bars in Total Trades 19.32
    Max. Shares/Contracts Held 100000 Account Size Required $23,127.50
    Total Commission $0.00000 Total Slippage $0.00000
    Return on Initial Capital 42.87% Annual Rate of Return 3.94%
    Buy and Hold Return 5.99% Return on Account 185.36%
    Avg. Monthly Return $730.32 Std. Deviation of Monthly Return $4,140.25
    Return Retracement Ratio 0.09 RINA Index 13.69
    Sharpe Ratio 0.06 K-Ratio 1.47
    Trading Period 9 Yrs, 16 Dys Percent of Time in the Market 97.64%
    Time in the Market 8 Yrs, 9 Mths, 30 Dys Longest Flat Period n/a
    Max. Equity Run-up n/a
    Date of Max. E. Run-up n/a Max. E. Run-up as % of Initial Capital n/a
    Max. Drawdown (Intra-day Peak to Valley) Max. Drawdown (Trade Close to Trade Close)
    Value ($27,208.50) Value ($23,127.50)
    Date n/a Date 08/09/2007
    as % of Initial Capital n/a as % of Initial Capital 23.13%
    Net Profit as % of Drawdown 157.56% Net Profit as % of Drawdown 185.36%
    Slct. Net Profit as % of Drawdown 157.56% Slct. Net Profit as % of Drawdown 185.36%
    Adj. Net Prof as % of Drawdown (8.56%) Adj. Net Profit as % of Drawdown (10.07%)
    Max. Trade Drawdown ($16,167.00)

    The weekly chart shows a very healthy profit ratio of 1.78, which is the best of all the strategies. Therefore trading the Parabolic Sar with the addition of this enhancement appears to provide the best optimization for the strategy, with a weekly chart giving the best signals.

    Conclusion

    Overall we can make several observations about Parabolic Sar and its effectiveness if traded on EUR/USD. The first is that it seems to work best on the weekly chart: the un-optimized strategy gives a profit factor of 1.52, which is second best, and with the help of the second enhancement, in which trades are only taken if the previous bar confirms the trend, delivers the best results, with a profit factor of 1.78.

    Secondly we can say that it is overall more profitable to trade the Parabolic Sar by going long rather than short. Even with the aid of a 200-day moving average to filter out counter-trend signals the shorting version of the strategy only made profit factors of 1.15 and 1.06 on the 4-hour and daily charts respectively. The un-enhanced Parabolic Sar results also showed consistently lower profits on the short side, with the 4-hr delivering 1.03, and the daily chart actually showing a loss which was the sole reason for the strategies unprofitability overall on the daily. Weekly showed the best results for shorting, with a profit factor of 1.30 for the un-optimized strategy.

    Overall, therefore, if you are going to use the Parabolic system it is probably best to use it as a way of getting long on the weekly charts.

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