How to use SAR system

How to do paper trades with information given in this blog ?

1. Introduction
Firstly, you should understand F&O trades.
Trades given in the blog are based on Cash/Spot rates. You will need to check it's appropriate Futurs rate of same script at given time.
Trading is SAR trading, (Stop And Reverse). It means at any point you should be having at least one Trade running, BUY or SELL will depend on SAR number given and last traded price.
It is a Trend following system. These trades are taken in middle of trend. We will never will be able to Buy at lowest rate and Sell at highest rate.
We wait for Trend to show it's hands.
As a typical SAR system, It will have whipsaws. Idea is to trade less or using options (call/put) during range-bound market.
Volatile scripts generally should be avoided as well as scripts with no movement.

2. Trading Example
1st Trade (e.g. Short Trade)
When certain script cash/spot rates goes below SAR number, You should SELL 2 lots of scripts with 0.5% as stop loss.
By EOD Close, Script also should have adjusted closing below SAR number. If it is between SAR and SL. Then you should close trade.
1st Lot booking is given in EOD post. One lot should be booked there. Although not neccessary but most of the time 1st lot is booked in 1 or 2 days.

Next trade.
After few days of taking short trade, someday, Scripts cash/spot rate goes above SAR number given in previous days EOD post.

Scenario 1 : 1st lot is Booked in profit.
Assuming 1st Lot was already booked, you should Buy 3 Lots of script (1 to close earlier short trade+2 new Long trades) with 0.5% as SL.
By EOD Close, Script also should have adjusted closing above SAR number. If it is between SAR and SL. Then you should reverse trade (3 Lots)

Scenario 2 : 1st lot is NOT Booked yet.
Assuming 1st Lot was NOT booked, you should Buy 4 Lots of script (2 to close earlier short trade+2 new Long trades).
By EOD Close, Script also should have adjusted closing above SAR number. If it is between SAR and SL. Then you should reverse trade (4 Lots)

3. Re-entry with same Trend.
In case, you have booked 1st Lot and script continues to go away from our SAR number.
If you are not comfortable, you can stick to above system with 1st Lot profit booking and 2nd Lot SAR booking.
* This is bit complex than above system. You will require 5-min/60-min intraday data and/or charting software or at least a excel spreadsheet with hourly data.

Re-entry Method 1 : 5-Min time-frame
Set 21 Ema and 34 Ema on 5 min. time-frame.
When EMA's gives cross to downward (21-Ema goes below 34-Ema) then wait to give candle close below the 21,34. Take the trade in short. SL is above 21,34 Ema close candle of swing high.
For buy position, vice versa (21-Ema goes above 34-Ema).

Re-entry Method 2: Using 60-Min timeframe
Watch out for 21-Hr SMA,22-Hr WMA and 34-Hr SMA.
When prices touch these points (and generally reverse ) you can take trade with direction of our SAR.
SL will be again 0.5%.
Price crossing 34-Hr SMA (Price > 34-Hr SMA) will turn stock/script bullish, if price goes below 34-Hr SMA, stock/script is turning bearish.

Out of two re-entry methods given above, 2nd method (60-Min T/f) is better and simpler.


4. SAR Trading and Gaps.
At times, you will find SAR number is between Prev Close and Next day's open. To handle such gaps, you will need to take care of it with following rules.


Easy method : ORB
Check High and Low of 1st 15-mis,
If as per SAR you were suppose to Go Short, Take short when 15-min ORB low is broken.
If as per SAR you were suppose to Go Long, Take long when 15-min ORB high is broken.

Here is ORB Explaination


Complex method : Fibo retracement.
If as per SAR you were suppose to Go Short, Calculate Fibo retracement from recent high to today's low, Go short as retracement points are touched.
If as per SAR you were suppose to Go Long, Calculate Fibo retracement from recent low to today's high, Go long as retracement points are touched.

Here is Fibonacci Calculator


5. EW view/Contra view.
EW view or Contra view can be traded with options trading, Many times these views are againest prevailing trend.

6. Other rules,
Avoid jumping in running trade. Wait for SAR system to give you next trade.
Avoid buying options, most likely you will be loosing money due to time erosion.

7. Whipsaws
Everyone hates whipsaws, But they are part of SAR Trading.
You can take it's to you advantage as well.
In case, you have already booked 1st Lot, Then, during whipsaws you can trade with 2 lots, and one of them can be booked @ around 1.5% - 2% movement of scrip from entry point.

8. Keeping SL on day of fresh SAR day.
As mentioned in above rule, Keep 0.5% as SL from SAR entry.
Once scrip's price has already moved about 1% in favorable of side from entry, You can change SL to cost.