Many people mistakenly believe that financial trading and geometry fall into two different categories. In addition to the arithmetic connection, geometry is also used for technical analysis indicators. Parabolic Sar is a technical indicator built on such a basis and many traders loves to use it in Forex trading.
This article will introduce to you what the Parabolic Sar indicator is, its principles of operation and how to use the Parabolic indicator in Forex trading are also available.
What is a Parabolic indicator?
Parabolic Sar is a technical indicator used to determine price direction as well as give a warning when price direction is changing. Parabolic Sar is called a “stop and reverse system”, developed by Welles Wilder. He is also the father of the Relative Strength Index (RSI). Traders use Parabolic to trade popularly because of its versatility.
The operation principle and how Parabolic determines the trend
On the chart, the Parabolic Sar indicator appears as a strip of dots located above or below the price candlesticks. Parabolic Sar signals allow you to identify the trend of the market. Using this indicator in trend prediction is what many traders use.
+ When the Parabolic Sar dots are below the price, the market is in an uptrend.
+ On the contrary, when the Parabolic Sar dots are above the price, the market is in a downtrend.
How to effectively trade Forex using the Parabolic Sar indicator
As an effective trend prediction indicator, Parabolic Sar allows users to open very precise trend-following orders. Check out how I trade Forex with the Parabolic Sar below.
Open a BUY order with the Parabolic Sar indicator as follows:
+ Entry Point: When Parabolic changes position from above to below the price.
+ Stop-Loss: At the nearest support before Parabolic changes its position.
+ Take-Profit: You should take profits when the price touches resistance levels that have been formed in the past.
Open a SELL order with the Parabolic indicator as follows:
+ Entry Point: When Parabolic changes position from below to above the price.
+ Stop-Loss: At the nearest resistance before Parabolic changes its position.
+ Take-Profit: You should take profits when the price touches support levels that have been formed in the past.
Notes when using the Parabolic indicator in Forex trading
+ Combine Parabolic Sar with other trading signals to use it better. The indicator always has a certain lag compared to the price.
+ Do not use this indicator to enter trend reversal trades. This will be very risky for your account.
Get to know Parabolic today on a Demo account. This is a very good technical analysis tool in trading you need to master.