I tested the Parabolic sar indicator 200 times, and this is what happened.
Do you like balls?
Well, you better like them because this indicator shows you a lot of balls on the chart.
In fact, the “S-A-R” in the Parabolic sar indicator stands for… “balls”.
Honestly, this is one of the best indicators ever created.
If you add it to the chart, you will quickly notice that it follows the price pretty nicely.
This makes the indicator excellent as a trailing stop-loss.
If you take a long trade near this green candle, you can set the stop-loss below the parabolic balls.
Then, as the balls start moving in the upward direction, you can trail it.
I have used this indicator to trail the stop-loss in my own trading journey multiple times.
It’s really good.
But what if you use it as an entry indicator?
You see, when there is upward momentum going on, the parabolic balls will appear below the price.
When the downward momentum is higher, the balls will appear above the price.
When the upward momentum returns and the price starts moving up, the balls will appear below the price once again.
So, some traders like to take trades when the balls switch direction.
For example, there was an upward move going on here.
Then, the price slowed down, and the balls started appearing above the price.
But then, when the upward momentum reappeared, the balls switched to below the price.
Some traders like to take a long trade at the closing price of the candle that made the balls switch direction.
Something like this… And they set the stop-loss below the balls.
If you plan to trade like this, there is just one problem.
You see, this indicator gives a lot of balls.
So, we need to filter some of the balls and kick out the bad ones.
To do that, I added the Alligator indicator, which is basically three lines.
On this chart, the green line is called the lip line, the middle one is the teeth line, and the other line is the jaw of the alligator.

I only took long trades if the lip line was above the teeth line, and the teeth line was above the jaw line of the alligator.
That pattern happens when the price is in an uptrend or has upward momentum.
On the other hand, when the green lip line is below the teeth line, and the teeth line is below the jaw line, there is a downtrend going on, or there is stronger downward pressure.
We will only take short trades in a downtrend.
We will also use the 200-period moving average to see the long-term trend direction.
If the price is below it, it’s a long-term downtrend, and we will only look to sell.
If the price is above the 200-period moving average, we will only look to buy.
The entry candle where the parabolic balls appeared should not be touching the alligator’s jaw line or the 200 moving average.
Just make sure the alligator doesn’t bite the balls.
This makes sure there is proper upward momentum going on and that the price movement is not slow.
Basically, the setup will look like this.
I used a 1.5-to-1 reward-risk ratio as the profit target.
You might be thinking this strategy must be really good because we are using multiple indicators to filter out bad setups, and overall, it just looks really good.
Well, hold your horses because the ball strategy’s performance was not great last time.
In the mostly good market test we did previously, it got around the breakeven win rate, which was 40% with the 1.5-to-1 reward-risk ratio, and the profit graph was kind of flat-looking.
It only made a tiny profit!
But this time, I want to find out how high the win rate can go if I take trades in an extremely good market.
On top of that, I want to find out how low the win rate can go if I take trades in an extremely bad market.
I have already tested a few strategies in extremely good and bad markets, and some of them really improved their win rate in a surprising way.
I want to see if this ball strategy can beat those win rates and perform even better.

But to find those extremely good and extremely bad markets, I went to the Gold/USD 1-day chart and added a 9-period EMA.
If the price was clearly staying above it, I saw it as an excellent uptrend.
When it was below the 9 EMA, or was ranging or choppy, I saw it as a bad market and marked it with red boxes.
I only took long trades since Gold/USD has been moving in an uptrend for the most part on the one-day time frame.
In the extremely good market test, I only took trades where I didn’t draw the red boxes.
And in the extremely bad market test, I only took trades where I drew the red boxes or where the price action was bad for a trend-trading strategy.
My entry time frame, where I took trades with the parabolic balls indicator, was 30 minutes.
So, this is what happened in the good market.
You know how this indicator is supposed to move the balls below the price when it detects upward momentum and then show the balls above the price when it detects a downward move.
For the most part, it was doing that pretty accurately.
However, sometimes it looked like it was flipping the balls even when the price was not reversing that much.
Now, the actual full form of this Parabolic S-A-R is “parabolic stop and reverse.” It is supposed to detect the stopped and reversing price movement.
But sometimes, when the price was not even reversing, the indicator was switching its balls.
Still, the profit graph went in the upward direction.
It went up pretty much from the start, but near the end, the profit graph started to become flat.
It stayed flat for the last 40% of trades.
It won five trades in a row and then also lost five trades in a row.
At the end, the ball strategy got a 52 percent win rate, which is a big improvement from the previous 43% win rate.
The breakeven win rate is 40% with the 1.5-to-1 reward-risk ratio, so this strategy definitely makes money in a good market.

But this strategy didn’t perform that well compared to other strategies we have tested in an extremely good market.
Some strategies gave a way better win rate in the same market structure.
But before we compare it with other strategies, we need to take 100 trades in the extremely bad market to see how low the win rate can go.
You see, since this strategy gives an entry point where the price stops and reverses,
it kind of spams trades at every up-and-down move.
In a bad market, where there is more up-and-down, sideways movement, this parabolic trend strategy sucked completely.

Its profit graph started to move down continuously from the start.
It won around six trades in a row at one point and lost around five trades in a row at another.
At the end, it got a 34% win rate, which is on the lower end of what we have seen in the extremely bad market.
The profit graph shows that if you continue to take trades with this strategy, you could blow up your account when market conditions get bad.
If you are thinking all strategies will continuously make a loss in a bad market, well, no.
Strategies like the fractal one managed to maintain a win rate around breakeven, even in an extremely bad market.
Those kinds of strategies probably have a lower chance of blowing up your account when market conditions get bad.
If you take trades with this strategy continuously in both good and bad markets, then this parabolic strategy’s profit graph will probably become flat, and you will get a win rate around breakeven.
But in a bad market, this strategy has a way higher chance of blowing up your account compared to some of the other strategies we have tested so far.
Its profit graph looks like it’s in a downtrend instead of a ranging market.
So, let’s compare it with other strategies by giving it a TR score, or the Trading Rush score.
In the extremely good market, the Parabolic sar strategy gets a 6.8 out of 10 in the win rate category.
The highest score in this category is 9 out of 10.

So, this 6.8 score is not that high.
Still, it is good enough.
In the “easy to use” category, I had given it a high score based only on the Parabolic SAR indicator.
But because we have to use the Alligator indicator as well to remove the bad entry points, I reduced its score to 6 out of 10 in the “easy to use” category.
In the “reliability” category, it gets a 6 out of 10, which is a low score because it gives entry points at every small reversal.
On top of that, sometimes there isn’t even a reversal, and the balls switch directions for no reason.
In the “consistency of profit” category, I gave it a 6.5 out of 10.
This is because even though the profit graph went up pretty consistently for the most part, it became flat in the last half.
It’s not the highest score in this category, but still, the profit graph went in the upward direction overall, which is more important.
In the “quality of trades” category, it gets a 6.5 out of 10, which is a low score because it spams trades and gives entry points at every price move.
Sometimes, the entry points were far away from the actual reversal point.
Some entries were kind of looking late.
We have seen other indicators that gave much better quality setups than this one.
That brings the TR score to 31.8, which is one of the lowest scores we have seen so far.
In the extremely bad market, the Parabolic SAR gets a 3.4 out of 10 in the win rate category.
It couldn’t even get a breakeven win rate, unlike some of the other good trading strategies.
The “easy to use” score stays the same at 6 out of 10.
The reliability score and the quality of trades score are both 3.4 out of 10.
Since it didn’t make any profit, it gets a 0 out of 10 in the “consistency of profit” category.
This brings the TR score in the extremely bad market to 16.2.
That is the lowest score we have seen so far in a bad market.
All other strategies we have tested in this bad market performed better than this parabolic ball strategy.

In the previous “mostly good market” test, the Parabolic SAR also didn’t get a good TR score compared to other strategies.
So, you can say this balls indicator gets a breakeven win rate in a mostly good market and barely makes money.
Even though it got a 52% win rate in the extremely good market, it was not the highest win rate we have seen in the same market structure in this testing series.
So, the indicator was not that great here either.
And since it got a low 34% win rate in the bad market, it will probably blow up your account if you find it difficult to filter out the bad market.
You can say these balls suck.
Since this is an ongoing testing series, let’s see if we find other balls that will suck as well.
Maybe some of them will have a really huge improvement in their win rates!
Thanks for watching.