Omega PSA

OMEGA

PSA

By: Donnie Reuben

Introduction To PSA PSA is an acronym that stands for Parabolic Stochastic Analysis. PSA is an extremely strategic strategy that works with the market and is forever changing with the market as new information and global data is received. This strategy allows the trader to dictate key levels in any market and execute a trade with virtually zero pullback. If PSA is used correctly then there should be no pullback. PSA consists of 3 major elements. Parabolic SAR: which indicates price and time based trading system. SAR stands for stop and reverse, which trails price as the trend extend overtime. Stochastic (Stochastic Oscillator): Is a momentum indicator that compares a particular closing price to a range of its prices over a certain period of time.

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Introduction To PSA But let us not forget the “A” in “PSA”. The A simply stands for Analysis, but not just any analysis. A “time-based analysis”. Due to the metric system of the MT4 platform, it gives you multiple charts per market pair each having their own timeframe. I simply cannot disclose how I use time as the key to unlocking a full understanding of the markets. That will be disclosed in the release of my full PSA production. Although I can say this, “If you’re given time frames and you’re not using them then it is a waste of time”.

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Introduction To PSA The Agenda here at PSA is to help those who want to take the next step in their trading journey. PSA aims to be not only a profitable strategy but an institution that teaches the people money and finance. One of PSA’s finest qualities would be that no matter how little the user’s account balance is initially. Utilizing PSA properly would ensure account growth without doubt. I’m speaking from what is now 4 years of experience and would like to brief you all on how this strategy has helped me in ways I couldn’t even imagine. From working a regular 9-5 job to never having to call anyone boss ever again. From waking up with less than $20 to my name only to trade and that $20 to $1,000 by the time I get ready for bed that night. The feeling of withdrawing hundreds from an ATM when a few hours ago you only had a few dollars to your name is one of the best feelings for someone who is near rock bottom. Trust me I was there and it felt great!

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Parabolic SAR The parabolic SAR trading strategy is essentially a trend trading strategy. It is used to identify a particular trend, and it attempts to forecast trend continuations and potential trend reversals. For example, if the parabolic line is green, you would follow the bullish trend and keep your long position open.

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Parabolic SAR The Parabolic SAR, or Parabolic Stop and Reverse, not only helps identify trends - but also, as the full name suggests tells you when to close out your trade and reverse the direction. Sounds pretty useful, doesn't it?

The Parabolic SAR is one of a range of trading techniques developed by J. Welles Wilder - a commodities trader and a hugely influential technical analyst.

His book 'New Concepts in Technical Trading Systems' introduced some of the cornerstones of modern technical analysis methods, including the Average True Range (ATR), the Relative Strength Index (RSI), as well as what he called the 'parabolic time/price system'. This last item is the indicator which we are focusing on, the Parabolic SAR indicator.

The indicator plots a curved pattern on a price chart, which describes potential stop and reverse levels. The shape of this pattern reminded Wilder of the parabolic curve found in classical geometry and mechanics, which is where the indicator's name comes from.

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Parabolic SAR The Parabolic SAR Calculation

As stated, the indicator plots stop and reverse levels on the chart. These are calculated from the Parabolic SAR formula, which is as follows: SARNEW = SARCURRENT + AF x (EPCURRENT SARCURRENT) Where the formula terms are defined as below: AF = Acceleration Factor - a changing value that increases in set increments for each period that a new high (for long positions, or new low for shorts) is reached for the trade. Wilder proposed a value of 0.02 for the initial value of AF, which would then increase in steps of 0.02 until it reaches a maximum value of 0.20.

EP = Extreme Point - the highest or lowest price seen for the duration of the current trend (highest for an uptrend, lowest for a downtrend).

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Parabolic SAR The curve of the Parabolic SAR indicator is intended to provide a guide to the path of a trending market. Wilder contended that a trending market will have a high probability of remaining within the constraints of the curve on the chart. It follows that if the price fails to do this and instead breaks through the curve, the trend may have run out of steam. It is at such points in time that you should stop and reverse your position.

Understanding the calculations behind the Parabolic SAR indicator can aid your understanding of how it works, what the various parameters mean and how to modify its usage.

However, remember that although it is useful to know, you do not need to worry about conducting the calculations yourself! This is because, with both MetaTrader 4 (MT4) and MetaTrader 5 (MT5), the trading platform will take care of the Parabolic SAR calculations for you!

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Parabolic SAR The parabolic SAR indicator, developed by J. Welles Wilder Jr., is used by traders to determine trend direction and potential reversals in price. The technical indicator uses a trailing stop and reverse method called "SAR," or stop and reverse, to identify suitable exit and entry points.

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Stochastic Oscillator The Stochastic Oscillator, also known as stochastic indicator, is a popular trading indicator​that is useful for predicting trend reversals. It also focuses on price momentum and can be used to identify overbought and oversold levels in indices, currencies, etc…

The Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low range over a set number of periods. The indicator can range from 0 to 100. The closing price tends to close near the high in an uptrend and near the low in a downtrend.

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Stochastic Oscillator Stochastic oscillators display two lines: %K, and %D. The %K line compares the lowest low and the highest high of a given period to define a price range, then displays the last closing price as a percentage of this range. The %D line is a moving average of %K.

The stochastic indicator is calculated using the following formula: %K = 100(C - L14) / (H14 - L14) where: C = the instrument’s most recent closing price L14 = the instrument’s lowest price of the 14-day period H14 = the instrument’s highest price of the 14-day period

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Stochastic Oscillator The indicator works by focusing on the location of an instrument’s closing price in relation to the high-low range of the price over a set number of past periods. Typically, 14 previous periods are used. By comparing the closing price to previous price movements, the indicator attempts to predict price reversal points.

The stochastic indicator is a two-line indicator that can be applied to any chart. It fluctuates between 0 and 100. The indicator shows how the current price compares to the highest and lowest price levels over a predetermined past period. The previous period usually consists of 14 individual periods. For example, on a weekly chart, this will be 14 weeks. On an hourly chart, this will be 14 hours.

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Stochastic Oscillator How does the Stochastic Oscillator indicator work?

When the stochastic indicator is at a high level, it means the instrument’s price closed near the top of the 14-period range. When the indicator is at a low level, it signals the price closed near the bottom of the 14-period range.

The general rule for the stochastic indicator is that in an upward-trending​​market, prices will close near the high. In contrast, in a downward-trending market, prices will close near the low. If the closing price slips away from the high or low, it signals that momentum​​is slowing.

The stochastic indicator can be used to identify overbought and oversold readings. It can also predict trend reversals.

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Stochastic Oscillator How to read the Stochastic Oscillator indicator?

The stochastic indicator is scaled between 0 and 100.

A reading above 80 indicates that the instrument is trading near the top of its high-low range. A reading below 20 signals that the instrument is trading near the bottom of its high-low range.

Readings above 50 indicate the instrument is trading within the upper portion of the trading range.

Readings below 50 signal that the instrument is trading in the lower portion of the trading range.

When the stochastic lines are above 80, the indicator signals that the instrument is overbought. When the stochastic lines are below 20, it signals that the instrument is oversold.

Overbought and oversold levels are useful for predicting trend reversals.

If the stochastic indicator falls from above 80 to below 50, it indicates that the price is moving lower. If the indicator moves from below 20 to above 50, it signals the price is moving higher.

Traders also look for divergence. This is when the trendline​​of the stochastic and the trendline of the price move away from each other. This indicates that a price trend is weakening and may soon reverse.

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Stochastic Oscillator Here’a an example of Stochastic’s being used:

**Note Each Crossover Is A Potential Signal And Entry Level**

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Accelerator Oscillator Like Awesome Oscillator, Accelerator Oscillator was also developed by Bill Williams.

Its purpose is to forecast the price changes through measuring acceleration or deceleration of the current market driving force. This is possible because, according to Williams, the price usually starts moving slower before a reversal. As a result, Accelerator Oscillator changes direction slightly before the change in momentum. This, in turn, may be used to forecast the change of the price. The oscillator fluctuates around the central zero levels. This is a place where the momentum and the acceleration are balanced. Its bars are either green (for the increasing acceleration) or red (for the decreasing acceleration).

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Accelerator Oscillator How to trade using Accelerator Oscillator Primarily, the Accelerator Oscillator helps to eliminate bad entries. You shouldn't buy if you see a red bar and you shouldn't sell if the last bar is green. It’s fairly simple. The potential solution is to buy if there are at least 2 green bars above 0 in a row. If the Accelerator Oscillator is below 0 and you want to open a buy trade, the momentum will be against you.

As a result, the entry to a long position when the indicator value is negative requires an extra confirmation: you will need 3 green bars to buy instead of 2. The same is with short positions.

Sell when the Accelerator Oscillator forms at least 2 consecutive red bars below 0. If red bars are above 0, you will need 3 bars to sell.

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Accelerator Oscillator Developed by Bill Williams as a development component of the Awesome Oscillator, it measures the difference between the Awesome Oscillator and the 5-period moving average.

This indicator reflects the pace at which the Awesome Oscillator changes, while this can be used in order to detect trend reversals before the Awesome Oscillator indicates such.

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Accelerator Oscillator In case the Accelerator Oscillator moves above the zero line, this is considered as a signal that acceleration to the upside will continue. In case the Accelerator Oscillator moves below the zero line, this is considered as a signal that acceleration to the downside will continue.

Generally, signals of a price surge are confirmed by two green bars following one another and the Accelerator Oscillator being above the centerline. Signals of a price decline are confirmed by two red bars following one another and the Accelerator Oscillator being below the centerline.

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Accelerator Oscillator There is another way to look at this indicator – to search for signals when the Accelerator Oscillator is on the opposite side of the centerline. For instance, a trader should look to go long, when the Accelerator Oscillator is below the centerline and go short, when the Accelerator Oscillator is above the centerline. In both cases, however, further confirmation is required – at least one more bar. Therefore, when the indicator is below the zero line and the trader intends to go long, at least three green bars need to be present below the zero line. When the indicator is above the zero line and the trader intends to go short, at least three red bars need to be present above the zero line.

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Accelerator Oscillator Calculating the Acceleration Oscillator The Acceleration Oscillator is derived from the Awesome Oscillator, by subtracting a 5period SMA of the AO from the AO. This is summarised by the following equation: Acceleration Oscillator = AO - SMA5(AO) The awesome oscillator looks at the last five bars on a candlestick chart in comparison with the previous 34. The value is then calculated by the difference in simple moving average (SMA) over these two timeframes.

The awesome oscillator formula is as follows: Median price = (High price of a session + low price of a session) ÷ 2 Awesome oscillator = 5 period simple moving average (median price) – 34 period simple moving average (median price)

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Conclusion Well it looks like that’s the end of my PSA Introduction. I will be getting more indepth about PSA in my upcoming hard copy series. The series is broken down into various academic levels of PSA. From beginner, intermediate, advance, & elite. I appreciate you the reader for taking the time to put forth effort and grasp somewhat of a general concept of what PSA is and how it can be easily used in your everyday trading to help you achieve new levels of discipline and financial freedom. This is officially the start of a bright and beautiful journey and PSA is here to make that journey feel like a walk in the park. Feel free to email or message me on social media. I will be leaving behind a source contact page and the end of my book. Once again feel free to contact me!

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