A Momentum Strategy You Should Know
ADX and Parabolic SAR Trend Continuation Strategy
In the ever-changing landscape of financial markets, we are often in pursuit of strategies that can harness the market momentum.
In this article, we will dive into a trend continuation strategy. We will combine the strength of ADX with the precision of Parabolic SAR.
By merging these two, we open the door to a strategy that excels in identifying strong trends and helps traders stay on the right side of market momentum.
Psst: Make sure you read till the end to see the results from the backtest
Let’s get started.
First, a quick overview of the indicators
Average Directional Index (ADX): ADX is a trend strength indicator that measures the strength of a market trend. It does so by analyzing the degree of directional movement in an asset’s price. When ADX is high, it indicates a strong trend, while a low ADX suggests a weak or ranging market.
Parabolic Stop and Reverse (SAR): The Parabolic SAR is a versatile indicator that assists in identifying potential entry and exit points. It forms dots either above or below the price, signifying the reversal of the trend. When the dots are above the price, it’s a…
