The Parabolic RSI Trading Strategy in TradingView
Learn to Combine the Parabolic SAR and the RSI in a Trading Strategy
Structured trading strategies aim to improve the predictability of markets through combining different techniques to come up with a market opinion. This article presents the parabolic RSI strategy.
The RSI and the Parabolic SAR
The RSI is a momentum oscillator developed by J. Welles Wilder. It measures the speed and change of price movements and helps identify overbought or oversold conditions. It’s bounded between 0 and 100 with 30 indicating oversold conditions and 70 indicating overbought conditions.
In contrast, the parabolic SAR is a trend-following indicator, also created by Wilder. It helps determine entry and exit points by indicating when the price might be reversing.
Appears as dots above or below price bars:
Below price = uptrend (bullish).
Above price = downtrend (bearish).
When the dots flip it signals a possible trend reversal.
The Parabolic RSI Trading Strategy
This strategy combines both indicators into one system. Here’s how it goes:
Calculate a 13-period RSI on the close prices.
Apply the parabolic SAR on the close prices.
A bullish signal is generated whenever the RSI surpasses 30 while the close price is above the parabolic SAR.
A bearish signal is generated whenever the RSI breaks 70 while the close price is below the parabolic SAR.
The following chart shows a few signals generated using the strategy.
Use the following code to generate the trading strategy.
// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © Sofien-Kaabar
//@version=5
indicator("RSI Parabolic Strategy", overlay = true)
rsi = ta.rsi(close, 13)
sar = ta.sar(0.02, 0.02, 0.2)
buy = rsi > 30 and rsi[1] < 30 and close > sar
sell = rsi < 70 and rsi[1] > 70 and close < sar
plotshape(buy, style = shape.triangleup, color = color.green, location = location.belowbar, size = size.small)
plotshape(sell, style = shape.triangledown, color = color.red, location = location.abovebar, size = size.small)The following chart shows a few signals generated using the strategy.
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