This system is called Prada. You would have to visit the trading forum on livecharts.co.uk to understand why it was called that but lets just say someone likes her shoes.
As a simple indicator based method Prada came about out of a discussion between traders as to whether one should trade the MACD and more importantly was any profit made from trading the MACD indicator down to the indicator or trade selection.
The rules are very simple
1) Select a 5min index chart
2) Add MACD and Parabolic SARs indicators (standard settings)
3) First trade is entered when MACD crosses and is obviously taken in the direction of the cross.
4) Stop is set to and moved with the SARs indicator
5) Trade every MACD cross taking profits either at the next cross or closing when price hits the SAR (which ever is sooner)
That’s it in a nutshell. I will post below some charts of the same day on different indices using this method.
As you can see the FTSE did not perform very well on this day. However, having suffered so many losses to end up down only 19pts isn’t too bad. That could have bee reduced and maybe turned into a profit had one used the SAR as a trailing stop but a points target to lock in profit. Also it is worth noting, some days on the FTSE are very trending which is obviously benefit this trading system.
DAX Chart to follow…..