SAR Parabolic

SAR Parabolic
So far, in the previous articles of our Forex course, we have focused on indicators that focus on finding the beginning of new trends. But just as it is important to identify new trends, it is just as important to be able to identify where a trend ends.

After all, what good is it to find a successful entry into the market without a successful exit?

An indicator that can help us determine when a trend may be ending is the parabolic SAR. The parabolic SAR places points on the chart that indicate the potential reversal of price movement. In the following chart we can see that the points change from being below the Japanese candles when the price goes up to being above the candles when the price turns towards a downward trend.

[caption id="attachment_621" align="aligncenter" width="377"] SAR Parabolic[/caption]

How to use Parabolic SAR

The best thing about parabolic SAR is that it is very easy to use. Basically when the dots are under the candles is a buy signal and when the dots are above the candles it is a sell signal.

This is probably the simplest indicator to interpret because it assumes that the price goes up or down. This tool is one of the most used in the trend markets with large rises or falls. Parabolic SAR should not be used in a side market where the price moves to both sides.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.