Dec 29

Parabolic SAR Indicator Forex Trading Strategy

Introduction to Parabolic SAR Indicator

Willes Wilder is the one who developed parabolic SAR (Stop and Reverse) indicator in forex trading strategy. This indicator is developed for discovering and exploiting the trends which are profitable in any kind of market. Among the technical traders, this indicator is very popular tool. It offers the simple mechanism to analyze the market and the most important thing is that it is straightforward. Compared to other tools, this indicator can offer some advantages which are unique. Many small reversals can be captured by this indicator with the accuracy which is remarkable. It is also helpful to minimize the potential faulty trade losses.

Parabolic SAR Indicator Forex Trading Strategy

Parabolic SAR Indicator Forex Trading Strategy

How to Use Parabolic SAR Indicator Forex Trading Strategy

There is calculation which can be found when people use the parabolic SAR indicator. Recursive formula will be used for calculating parabolic SAR. It will tie the prices of period one another with simple arithmetic.  SAR of today is equal with SAR of yesterday plus a (EP-SAR of yesterday). It can be translated into another arithmetic form after all. SAR of tomorrow is equal with SAR of today plus a (EP-SAR of today). EP becomes the maximum recorded during the period of time which is considered. Accordingly update can be found for EP if there is new record broken during each analysis period. It means that the change can also be found in the SAR value. “a” becomes the representation of the factor of acceleration. The calculation of SAR value will lead one of two courses taken for deriving the signals from indicator.

In forex strategy, parabolic SAR can be the trend indicator. First gauging the market direction must be the best way for trading with parabolic SAR indicator. Before they can use the parabolic SAR for trading the fluctuation in shorter term, simple tools from trend line to average true range tools should be used first so the shorter term fluctuation is able to be exploited within framework in longer term.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>