Parabolic SAR – A Technical Indicator That You Should Know

In this article, we are going to focus on a popular indicator, which you can use in technical analysis and implemented it in your forex trading strategy. This indicator is the Parabolic Sar (Stop and Reversal) developed by Welles Wilder creator of RSI and DMI.

Most indicators have been created to identify if a trend is in place (the trend is your friend as they say) but they are usually too slow, as a result, if you rely only on a trend indicator you will probably lose most of a trend’s movement. For that reason you should use others types of indicators together with trend indicators. If you do not do that, you will experience many times a winning trade turning into a losing one.

One of these indicators is the Parabolic SAR. The calculation of Parabolic SAR is a little complicated but fortunately, you do not have to understand it, since all good trading platforms and charting packages will calculate it automatically for you. It appears as a series of dots above or below the prices, which can signal a possible reversal in the trend. Here is an example:

As you can see in the graph, dots are typically below the candles for the duration of an uptrend and above them during a downtrend. Therefor when price cross above the dots you have a signal that a downtrend has ended, which means that, is time to exit the trade. On the contrary, when prices cross below the dots, you have a signal that the uptrend has finished.

The best way to use Parabolic Sar is to use the dots as trailing stops. In that way when you place a trade you should use Parabolic Sar as a stop loss or stop profit and close your position when you get a signal to exit.
Parabolic SAR works best when there is an actual trend but when the market moves in a choppy way and there are many whipsaws and fluctuations it is not reliable. Having that in mind it is advisable not to use it in those conditions, but wait until a trend is established.

Parabolic Sar is a useful indicator and if you use it in the right way, it will boost your profits in forex trading. Nevertheless, you should always use it in combination with a trend indicator if you want to get the most of it.

Source: Opportunities Planet

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I was not going to even dignify this thread with a reply. But it occurred to me that some poor (figuratively speaking not literally) (at least not yet) new trader is going to take the above as ‘gospel’ and think that ‘kochtgr’ is their ‘savior’ and out of the goodness of his / her heart has posted the above total and utter nonsense for their benefit.

What I REALLY want to understand Administrators is this: how come, when I look at this post, it says that this person ‘kochtgr’ has 7 posts and joined in January 2011 but if you go to this person’s profile this is the ONLY post that is listed when searching for all posts made by them or all threads started by them??? What is more worrying than the fact that there is STILL a problem with this latest version of vBulletin (the upgrade) is what OTHER posts, like this one, are ‘lurking around’ and nobody can find them???

Regards,

Dale.

You mean it DOESN’T workin quite like the picture?

:stuck_out_tongue:

Nah. Tried that!!! LOL!!!

How are you doin’??? It’s real late here (well it’s real early here depending on which way you’re lookin’ at it) and I’m just ‘passing time’ until the market opens later on today (MY ‘today’). ‘Pretty sick’ is it not!!! LOL!!!

Put it another way: I’m not sure about a LOT of things in life. But there are certain things I’m WELL over 1 000% sure of and that is the work of Mr J. Welles Wilder Jnr. And it really ‘gets my goat’ when somebody tries to use his ‘genius’ to ‘solicit’ clients (although I suppose if the the thruth be told, I, ‘by default’, do the same thing EXCEPT for the fact that I at least KNOW what I’m talking about insofar as his work is concerned)!!!

Nice (as always) to ‘chitter-chatter’ with you Master Tang!!!

Regards,

Dale.

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… Oh what a disappointment.

Very disappointing…