today I'm revealing a
simple trading strategy that is proven to have a high win rate and for this
strategy we're going to use a combination of three different indicators the 200
ema parabolic SAR and the macd indicator so first let's start with the macd
because that will give us our main entry signal the macd is one of the most
popular trading indicator that does a very good job of detecting momentum for
the settings i'm going to leave it as it is and just use the default settings
so as you can see the indicator consists of three parts first we have the blue
line which is called the macd line this line moves faster and is more sensitive
to price changes which will be the main focus of the macd indicator next we
have the orange line or also known as the signal line this line reacts slower
to price changes and is mainly used to filter out market noises and finally
we have the histogram which simply shows the correlation
between the macd line and the signal line for example if the line crosses above
the signal line the histogram will turn green and if it crosses below the
histogram will turn red the gap between the macd line and the signal line also
affects the size of the histogram if the gap is wide the histogram will grow
longer and if the gap is tight the histogram will grow shorter now technically
you could still utilize the macd without the histogram however i prefer to just
keep it because there are times where it's actually quite useful like in this
example here we can see that the macd line is clearly crossing over however
because the lines are too close to each other we can't really see what's going
on so instead of looking at the lines you can just look at the color of the
histogram to see which direction did the line crossed over now a common way of
trading the macd is by simply taking long positions if the macd line crosses
above the signal line and taking short positions if
the macd line crosses below the signal line however for this
combination strategy we're going to add an extra layer of confirmation which
brings us to the second indicator for the strategy which is the parabolic sar
the parabolic sar is one of the most simplest and easy to learn indicator that
does a very good job of identifying trends on the market and for the settings
i'll also leave it as it is and just use the default settings now right off the
bat we can clearly see that the indicator consists of multiple dots and the way
we utilize them is very simple if the dots are below the candle it indicates
that the market is on an uptrend and if the dots are above it indicates that
the market is on a downtrend now a common way of trading the parabolics are is
by simply taking long positions when the dots are below the candle and taking
short positions when the dots are above the candle however using the strategy
this way actually results in a very low win rate because remember markets
aren't always trending it can also move within
a range like this and notice the parabolic sar isn't really
performing well on a sideways market it gave many false signals all the traits
that i'm currently showing you in the screen ends up being a loss and that is
why for this strategy we're not taking long or short positions based on the
dots alone instead we're using them to give extra confirmation and making sure
that we're trading within the same direction of the trend now moving on to the
third indicator which is the 200 period exponential moving average or the 200
ema for short so for this strategy we're going to use it to identify the
long-term trend direction if the price is above the 200 ema it indicates that
the market is on an uptrend so we only take long positions and if the price is
below the 200 ema it indicates that the market is on a downtrend so we only
take short positions and so we have discovered all the three indicators that
we're going to be using
so now this is how you trade the full strategy so let's
start with long positions the first step is you need to make sure that the
price is above the 200 ema the next thing you need to see is the macd line
crossing above the signal line while the parabolic sar is positioned below the
candle like this and so this will be your long entry next for your exit
strategy you want to place your stop loss at the parabolic sar and set your
profit target at one to one risk ratio and as you can see our profit target
ended up hitting this candle right over here now the next possible entry signal
comes up shortly after that we have a crossover upwards on the macd while the
price is above the 200 ema however as you can see here
when the crossover happened the parabolic star is still
above the candle which is not what we want we want this to be below the candle
and so for situations like this what we do is we wait for the dot to go below
the candle which is here while making sure that the macd is still crossing
upwards and so this will be our long entry signal and again for your stop loss
place it at the parabolic sar and set your profit target at one to one risk
ratio and as you can see this one is another profitable trade next we spotted
another long entry right here we have a cross up on the macd while the
parabolic sar is below the candle so again place your stop loss at the
parabolic sar and profit target at one to one risk ratio and so
this one ends up hitting this candle right here now let's
get into some short examples alright so as you can see this candle closed below
the 200 ema meaning we're preparing to take short entries next we saw a cross
down on the macd while the parabolic are is above the candle and so we can
place a short position right here then place your stop loss at the parabolic sar
and set your profit target at one to one risk ratio and so this one is another
profitable trade and right over here we spotted another cross down on the macd
then you look at the position of the dot which in this case it's above the
candle which means this will be another valid short entry next place your stop
loss and profit target and as you can see this one ends up hitting this candle
right over here so that's enough examples
let's get straight into the 100 test for this back test i'm
going to trade the euro usd 30 minute time frame with a starting capital of one
thousand dollars and for our money management we are risking two percent over
total capital per trade and for each trade we're using 200 times leverage so
without further ado let's start back testing and finally after back testing the
strategy 100 times the results are in it took us 106 days to reach 100 trades
and out of that 100 trades we received a very good win rate of 69 our most wins
in a row was 7 and our most losses in row was only three and in total
we made a profit of five hundred and ten dollars and twenty
seven cents which equates to around fifty one percent overall gain of our one
thousand dollar capital and remember we got this result by risking only two
percent over total capital per trade if you want to risk more capital portrayed
to get larger returns you can change it to three percent four percent or even
five percent per trade and also in this back test i only traded it on one
currency pair the euro usd that's why it took 106 days to reach 100 trades if
you want more entry signals in a shorter period of time you can just trade it
on multiple pairs now while back testing i discovered a couple of tips that you
can implement to further increase the win rate for the strategy and one of them
is limiting your stop loss
let me explain so normally if you took a position you're
setting your stop loss at the dot of the parabolic sar however in this
particular trade you can see that the position of the dot is too far from the
price therefore if you decided to place your stop loss here your risk will be
too large and if the trade ended up hitting the stop loss it will give you a
massive loss and that is why i recommend limiting your stop loss to only 0.7 so
no matter how far the parabolic sar is your stop-loss will never exceed 0.7
however by doing this you will also limit your upside potential so it's really
up to you depending on your risk tolerance and remember i only tested this
strategy using one settings if you want to optimize this strategy further you
can backtest it yourself using different settings to see which one works best
for you so i just revealed to you a simple high win rate strategy that you can
immediately use right now.