This is era of technology and internet that is why traders are also advanced. Experienced traders love to develop their own indicator and strategies. parabolic sar strategy is one of them.
Parabolic sar strategy:
Parabolic sar is strategy is developed by Welles Wilder a well-known trader. This strategy is developed for spotting market stop and reversal point. Parabolic sar strategy is used to predict market direction. This strategy is a combination of trend and momentum indicator. This strategy is self-sufficient for day trading.
Features of Parabolic sar:
- Platform are: any
- Chart: Fluctuating dotted curve.
- Use different colour line (any colour)
- Timeframe: short term few minutes, few hours are time frame are preferred
- Assets and currency. Any currency pair (EUR/USD, GBP/USD, USD/JPY, USD/CAD, AUD/USD, NZD/USD, EUR/GBP, GBP/JPY, EUR/JPY, AUD/JPY, USD/CHF, XAU/USD) any Commodity.
What is Parabolic sar?
Parabolic sar is diamond shape dotted line that move above or below profit line. Parabolic sar with the help of these dotted line locate market movement.
Uses of Parabolic sar strategy:
- Parabolic sar used to find level of market reversal stop loss.
- Parabolic Sar help to set your direction toward the trend’s direction.
- Parabolic sar is a combination of 2 indicators Moving average indicator that helps to determine market trend reversal and stop.
- Parabolic Sar gives clear view of market or we can say that is create complete story of market by its fluctuations.
- Its red and green diamond depict market situation.
Steps of Parabolic sar strategy:
Strategies are all about steps and process if steps are flowed with skills it can lead to winning trade.
Step 1: choose a parabolic sar setting around point 2 any color you prefer.
Step 2: chose a time frame that is suitable for your trade but experts use short time trade (hours) and currency pairs because currencies tend to trade for longer time.
Step 3: after adjusting parabolic sar wait for reversal break out of diamond above price line, after first 2 dots place your trade.
Step 4: place your sell trade when dotted line start to move over the price line in decline movement it is bearish trend.
Step 5: place your buy trade when dotted line start to move below the price line in upward move it is bullish trend.
Step 6: major step is when to stop or take profit, when the market is uncertain about its trends or give signals of market swing.
Some important points about Parabolic sar strategy
Parabolic sar strategy is most common strategy because of its simplicity and user-friendly interface.
It is mostly used with the combination with other indicators that increase its validity.
It requires traders’ attentions and experience to read signals.
Parabolic sar strategy is one of the simpler strategies as I know and I am big fan of this strategy.
Parabolic sar strategy point out market direction and parabolic SAR is used to spot price changes and trend reversals within a time frame.
Without considering market direction the trade can be a failed trade.