Parabolic SAR indicator

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Parabolic SAR indicator Trading with Parabolic SAR involves the following signals:

PSAR dot is above the price – downtrend.
PSAR dot is below the price – uptrend.

Parabolic SAR indicator Try this exercise diligently and see your profits growing. Trade with the trend. If you are trading a counter trend, trade small & with strict SL and for a very short duration.

The parabolic SAR, was first developed by Welles Wilder is price-and-time based trading system. Wilder originally called the system he developed the ‘Parabolic Time/Price System’. The SAR in the name stands for ‘Stop and Reserve’, which is the indicator used in system. The parabolic SAR remains a very useful indicator for traders engaging technical analysis and can help a trader determine where to place trailing stops.

Careful with this Indicator

According Welles Wilder’s original research this occurs around 30% of the time. This means that traders need to be careful when using the indicator, as it is prone to produce whipsaws when the instrument in question is not trending. The Parabolic SAR is designed primarily to follow an overriding trend and act as a trailing stop.

parabolic sar indicator settings

Parabolic SAR has two variables: a step and max step. Settings recommended by W.Wilder are: a step of 0.02 and the max step of 0.2.

 Pros

Let me mention my experiments on the same – the pluses:
1. going along with the trend and
2. maximizing profits on the up and downside of a movement is the main advantage.
3. On a trending day, a small contract like the mini can give you almost 25% of your margin.

Cons

1. The whipsaws will cost a great deal in brokerage;
2. Flat days you’ll make a small (and frequent) loss – be prepared if you’re loss-averse to small drains;
3. The intradayer will initially *lose* on the gap up or down;
4. The emotional discipline required to just “follow the dots” is next to impossible if you’re used to more ‘intuitive’ and emotional plays. It’s almost disappointingly monotonous to make money on SAR – the most accurate tool for winning trades.:)

Download Parabolic SAR indicator

Its in the Mt4 and Mt5 default indicator

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