Hi,
A lot of people have asked in the daily "Trader's talk" post about how do I calculate the SAR.
But before I put down some details about it ,I would like to mention that this method may not be suitable for your trading style for example an intraday trader may find "SAR" too far and the calls will be of no use to her/him.While a Positional trader will find it too close to his entry point and fear a whipsaw( even if he has a time horizon of as less as 5-6 days).
This method has evolved keeping in mind the swing trading mindset (we try to enter during intraday pullbacks in the direction of trend and hold on to the position till the SAR gets triggered,we keep adding to our position every day on intraday pull back and use the gap (up/down in our favor) to add or reduce position.
What is SAR?
SAR (stop and reverse) is a point/level at which it is believed that the trend which is currently in place changes to the opposite one.For swing trade SAR can be any level that is beyond the expected intraday noise(movement),yet it should not be too far from the recent price action(that will result in bad exits and you will end up giving back your accumulated profits)
there are no hard and fast rule for SAR and method changes as per market conditions (stock/index in trend or sideways movement)
Following are some ways how I calculate SAR
1) Recent price action (one,two, three day high/low )
2)Moving average (200 dma)
3)RSI recent peak and price at that point
4)ATR (average true range)
The system does not uses any trend line, pivots,and the use of indicators is minimal.All the importance is given to prices.I give more importance to selecting stock and trading them with this method.You should not stick to your favorite stock/index and be willing to change as per market conditions.
I think thats all about it,if you have questions related to above feel free to ask,but make your own rules and do your own research.that will help you in your long term success in the markets
Good luck
Related Post
How to use the market calls table
Should you take all the SAR trades?
Opinion and Answers about SAR and Trading.
Two scenarios that can lead to a better performance of SAR trades.
A lot of people have asked in the daily "Trader's talk" post about how do I calculate the SAR.
But before I put down some details about it ,I would like to mention that this method may not be suitable for your trading style for example an intraday trader may find "SAR" too far and the calls will be of no use to her/him.While a Positional trader will find it too close to his entry point and fear a whipsaw( even if he has a time horizon of as less as 5-6 days).
This method has evolved keeping in mind the swing trading mindset (we try to enter during intraday pullbacks in the direction of trend and hold on to the position till the SAR gets triggered,we keep adding to our position every day on intraday pull back and use the gap (up/down in our favor) to add or reduce position.
What is SAR?
SAR (stop and reverse) is a point/level at which it is believed that the trend which is currently in place changes to the opposite one.For swing trade SAR can be any level that is beyond the expected intraday noise(movement),yet it should not be too far from the recent price action(that will result in bad exits and you will end up giving back your accumulated profits)
there are no hard and fast rule for SAR and method changes as per market conditions (stock/index in trend or sideways movement)
Following are some ways how I calculate SAR
1) Recent price action (one,two, three day high/low )
2)Moving average (200 dma)
3)RSI recent peak and price at that point
4)ATR (average true range)
The system does not uses any trend line, pivots,and the use of indicators is minimal.All the importance is given to prices.I give more importance to selecting stock and trading them with this method.You should not stick to your favorite stock/index and be willing to change as per market conditions.
I think thats all about it,if you have questions related to above feel free to ask,but make your own rules and do your own research.that will help you in your long term success in the markets
Good luck
Related Post
How to use the market calls table
Should you take all the SAR trades?
Opinion and Answers about SAR and Trading.
Two scenarios that can lead to a better performance of SAR trades.
Naveen said...
ReplyDeleteHave a doubt regarding the SAR, what if the price beat around SAR. What we should in that time. Should we exit and entry every time it crosses[overlaps] SAR, which will make our brokers rich. Please suggest.
My comments
hi Naveen
SAR is a point which is away from intra day noise keeping current swing in mind.So even if the price beats around SAR you need to be cautious(i prefer to be out as soon as SAR is touched,some times even early..if i am following intraday moves)and sar is just for that day it doenst mean you keep entering exiting at sar(for example if sar is breached you reverse to the opposite position and new sar will be updated in the evening post(which is generally today's or yesterdays low(away from recent price action...not at the same level))...so dont worry your broker will not become rich..as one position generally changes to another in one day..i will update the market calls table(tomorrow )and then see how i would have traded in bank nifty
Cheers
I received a mail from Richard,asking help regarding SAR calculation...following is my reply
ReplyDeleteHi Richard
Good to hear from you
I have written a post regarding SAR you can read by following the link under
http://financeandtradingmadeeasy.blogspot.com/2010/01/how-do-i-calculate-sar.html
The problem while calculating SAR is that there is no one way....and depending on market condition it changes...but the whole idea is the same that is that you need to find a point that is away from expected daily noise and do it before markets open so that your calculation is not influenced by opening prices or sentiment....best time to do is just after market close...
I would love if you ask your question in the blog itself...lots of people might have the same query,so every body can benefit from it ...
I wish you good luck...surely I can help you...and it changes with our own time frame...this SAR is for swing trader...and will not work for day trader or positional trader (lots of problem arise when we mix these three types of trading ...unknowingly)
So other things need to be examined before we come to SAR
Cheers
AJ
anuj
ReplyDeletelike to know more insights in the calculation part..please let me know
i want to trade in nifty future how i can get ur services ? my mob.no. 9412808775
ReplyDelete@shailendra nath mishra
ReplyDeleteHi, I don't provide any services.
Just update this blog with my daily positional nifty/bank nifty futures analysis
Thanks
Do you have a calculator for nifty futures and stock futures SAR values on the basis of EOD?
ReplyDeleteHi charish
ReplyDeleteNo, I manually calculate the SAR values, it's a discretionary method for swing trading.
Can you forward me Manual calculation procedure / method of SAR?
ReplyDeleteIf so, shall be highly appreciated.
@Mumukshh Ki Rachanain
ReplyDeleteI don't have any manual calculation procedure for SAR, some broad guidelines I have suggested above. I look at chart structure and decide on SAR for swing trading, taking help from above guidelines/indicators.
Hello sir, i want to start SAR trading from initial level.
ReplyDeletePlease provide me some methods so that i can backtest with 2 years data.
-Arun
(Patiala, Punjab)
You can be a part of trading community at
Deletehttp://tradeinniftyonly.blogspot.in
A very simple way of sar trading is mentioned there. You can seek help from active traders available there for sar trading. Good luck.
Sir, I am unable to understand SAR from their excel, they are using complex formulas.
DeleteCan you pls send your Excel to learn the concept of SAR trading.
I am also ready to pay for learning Stop & Reverse.
Arun, they are using two types of SAR numbers. JNSAR which is a number updated daily and another is J10 SAR, which is 10 period moving average on daily chart and using it with filter of 20 points. You can back-test J10 SAR as it is simple formula.
DeleteI am not providing any paid service. Just doing discretionary trading based on price action. Not using any excel. Thanks.
hi aj
ReplyDeletehope u remember me from just nifty my mail id is psvohra68@gmail.com if u could drop mail wd like yo know something
thanks
parminder
Yes I remember, just sent a mail.
Delete