Stop And Reverse (SAR) uses a reversal logic that switches positions between long and short trades, keeping a trader constantly in the market. The logic behind this method of trading is that the market must go either up or down, and a stop-and-reverse system attempts to catch strong trends since a trader will constantly be in the market.
Trade example
A trade is initiated on 17th March when a limit order to sell 3 contract at 5505.00 is placed. At this point, the current price is well above the limit price.
As outlined in our trading plan, if price breaks an area of previous support around 5505.00 (remember, prior support often acts as resistance), it will provide the catalyst to take the short trade. On March 17th, the limit order is filled and we open the short trade. Our stop loss is set 15-20 points above the entry price with a stop order to buy at 5525. Similar to the previous example, we will place a simultaneous order for a profit target. This time, however, if price reaches our profit target we will not just sell, but we will also reverse the position and enter the long trade.
five days after our entry, price falls to 5382 and we place an order to cover shorts at 5405 and another order to go long above 5430 the price moved up and we booked our shorts and entered long trade on March 22nd We have successfully reversed our original trade and are now in a long trade.
MULTIPLE PROFIT TARGETS
a money management strategy that buys into a long position and aims to split the position and sell at two separate profit targets, the first position is covered at50 points the second position is covered at 100/150 points depending on the moment and the third position is covered on reversal. This position is triggered based on each subsequent day's SAR
In the example, we enter a long trade using a market order to buy on March 22nd, getting immediately filled for three contracts at a price of 5430.00 Now that we are in the market; we enter a stop order to sell two/three contracts at 5405 for our initial stop loss. We then enter order to sell one contract at 5480.00 and cover one lot at 50 points and place a stoploss for the remaining lots@ cost. The trade quickly moves in our direction and, in a little under a week, on 31st march we covered the second lot @5860. Now, we want to protect our profits and prevent this trade from becoming a loser. Since we already have a nice profit, (from 5430 to 5860) we move our stop loss for our remaining contract up to 5700.
This is done to ensure that even if the trade turns and goes against us, we are still guaranteed a profit able trade; however, we will give this trade a chance to become even more profitable and place an order below the previous resistance.
.png)
