Parabolic SAR

(Stop and Reverse system)

Usage: Evaluating Trends/Reversals

Trading: Catching a trend reversal and following it using a trailing stop

Standard Settings: 2% acceleration factor and 20% maximum step

 

Introduction to the Parabolic SAR

Parabolic SAR is an indicator that helps traders to identify where a trend might be ending. The indicator places dots on a chart that indicate potential price reversals.

-The Parabolic SAR is best used with trending markets (markets or assets that are moving in strong-trends)

-According to statistics, trending markets occur 30% of all times

-The Parabolic SAR will prove more effective if it is combined with another indicator

-It can be combined effectively with ADX

 

Calculating the Parabolic SAR

Rising Parabolic SAR = Previous SAR + Previous AF(Previous EP + Previous SAR)

Falling Parabolic SAR = Previous SAR- Previous AF(Previous SAR- Previous EP)

Where,

-AF or Acceleration Factor is the determinant of the sensitivity of the SAR

-Previous SAR= The SAR of the previous period

-EP or Extreme Point represents the Highest High (in case of an uptrend) or the Lowest Low (in case of the downtrend)

 

Trading with the Parabolic SAR

The Parabolic SAR aims to catch the master trend and follow it like a trailing stop.

(i) Identifying, evaluating, and following the trend

(ii) Spotting price reversals

(iii) Defining entry and exit levels

(iv) Calculating Trailing Stops

 

Platform Setup

You can install 'Parabolic SAR' directly in MetaTrader-4 or MetaTrader-5:

□ GO TO → INDICATORS → TREND → PARABOLIC SAR

□ SETTINGS → STEP 2% (0.02) | MAXIMUM 20% (0.2)

 

What is the Parabolic SAR

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