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Parabolic SAR Indicator: Open your trading station and just try it!

Publish Date19/06/2012 09:06:40 AM

Last Update19/06/2012 09:25:17 AM

Parabolic SAR Indicator: Open your trading station and just try it!

 

 

 

Traders are frequently attempting to mitigate their losses by learning how to manage their desks. One of the most efficient technical indicators that are designed for risk management is known as Parabolic SAR.

 

 

 

So many traders know this technical indicator as a (stop and reverse) indicator which was created by J. Welles Wilder with the goal of defining market trends.

The figure below is a simple chart with Parabolic SAR applied using the default inputs of 0.02 step and 0.2 limit.

Click on the image for a larger view

   

The box to the left shows that the market started to move higher and then after building a base, the dots of Parabolic SAR moved higher as the price continued to move bullishly.

The box to the left explains the case when the market decides to carve a potential peak where we can see the intersection of price with the Parabolic SAR plot. The candlestick immediately followed the intersection, then plots above indicating a confirmed reversal. As price continues to move to the downside, Parabolic SAR is plotted above price until another intersection takes place.

Briefly speaking, when the indicator continues to print higher, this gives the trader the potential to move their stop beyond break-even, locking up gains as the position moves in the traders’ favor and when price retraces and crosses the Parabolic SAR plot, the trader can close their trade in anticipation of a potential trend change against the trader’s initial position.

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