mForex - 3 Moving Average - Parabolic SAR

The mForex - 3 Moving Average - Parabolic SAR indicator combines three simple moving averages with the Parabolic SAR to provide a comprehensive trend-following system for identifying potential market reversals and entry points.

Usage

The mForex - 3 Moving Average - Parabolic SAR tool is designed for trend identification and scalping strategies. Traders can use the intersection of the moving averages and the position of the Parabolic SAR dots to determine market direction and momentum.

Long Positions

A long entry is typically considered when the fastest moving average (MA12) crosses above both the medium (MA26) and slow (MA52) moving averages while the Parabolic SAR dots appear below the price action. This confluence indicates a shift toward bullish momentum.

Short Positions

A short entry is typically considered when the MA12 crosses below both the MA26 and MA52 moving averages while the Parabolic SAR dots appear above the price action. This alignment suggests a bearish trend is forming.

Risk Management

The Parabolic SAR dots can serve as dynamic stop-loss levels or trailing stops. In a long position, the stop loss is often placed at the PSAR dots or the nearest recent low. For short positions, the stop loss is placed at the PSAR dots or the nearest recent peak. A common profit-taking target for this system is a risk-to-reward ratio of 1:2.

Details

The script utilizes three Simple Moving Averages (SMA) of varying lengths—12, 26, and 52 periods—to capture short-term, medium-term, and long-term trend data. By analyzing the "stacking" of these averages, traders can gauge the strength of a trend.

The Parabolic SAR (Stop and Reverse) component adds a volatility-based filter. It calculates potential reversal points based on price acceleration. When price crosses the PSAR value, the dots flip orientation, signaling a possible change in trend direction. The integration of these two technical studies aims to filter out false signals that may occur when using moving averages alone in sideways markets.

Settings

Moving Average Settings

• Length MA First: Sets the period for the fastest moving average (Default is 12).
• Length MA Second: Sets the period for the medium-term moving average (Default is 26).
• Length MA Three: Sets the period for the slowest moving average (Default is 52).

Parabolic SAR Settings

• PSAR Start: The initial acceleration factor for the Parabolic SAR calculation.
• PSAR Increment: The step value by which the acceleration factor increases each time a new high (in an uptrend) or low (in a downtrend) is reached.
• PSAR Max Value: The maximum limit for the acceleration factor.

FAQ

How do I interpret the three moving averages?

The moving averages indicate trend direction based on their order. A bullish trend is confirmed when the 12-period MA is above the 26-period MA, and both are above the 52-period MA. The opposite applies to bearish trends.

What do the Parabolic SAR crosses signify?

When the Parabolic SAR crosses the price line, it indicates a potential reversal. If the dots move from above the price to below it, the sentiment is shifting to bullish. If they move from below to above, the sentiment is shifting to bearish.

How can I access the mForex - 3 Moving Average - Parabolic SAR?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.