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Parabolic SAR Basics
Parabolic SAR= SAR n +1 = SARn + EP -SARn
Here, SARn and SAR n+1 represent the current period and the next period SAR values.
Here, EP (extreme point) is a record kept during each trend.
Parabolic SAR or you can call it Parabolic Stop and Reverse is one of the most popular trading indicators used by traders to find the potential trend and reversals. This indicator appears in the chart as a series of dots that ribbons around the price. you can easily use these dots to analyse the security and predict possible trends and reversals. when the dots are below the price it usually indicates a possible upcoming bullish trend and vice versa when the dots are above the price it indicates an upcoming bearish trend.
Parabolic SAR Key Facts
- Parabolic SAR (Stop and Reverse) is a technical analysis indicator used to determine the potential trends and reversals using a series of dots.
- The Parabolic SAR dots oscillates around the price which helps traders to identify the direction of an underlying trend. When the SAR points are below the price it suggests an uptrend while, when the SAR dots are above the price it suggests a downtrend.
- You can even use this indicator to find the reversal signals when the SAR points change their position relative to the price. for example, when the Parabolic SAR dots are above the price and it moves below the same it could signal a potential trend reversal from bullish to bearish.
- The default period for the Parabolic SAR indicator is 0.02. If you are a trader who loves to trade aggressively you can reduce the period and vice versa If you are a trader who loves to take long-duration trade you can increase the period.
How to add Parabolic SAR on Olymp Trade chart
Firstly, log in to your Olymp Trade account. In case you don’t have one fill out the form below.
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Secondly, go to the Olymp Trade dashboard and click on the indicator button.
Thirdly, select Parabolic from the menu.
You can also change the colours of the dots in case you want and increase the width of the same.
How to trade with Parabolic SAR on Olymp Trade
Trading with Parabolic SAR on Olymp Trade is very easy. you just need to remember the golden rule of the indicator. The golden rule of the indicator says:
- When the asset is in a bullish trend that means the asset is dominated by buyers then the Parabolic SAR dots will stay below the candlestick.
- Similarly, when the asset is in a bearish trend that means the asset is dominated by sellers then the Parabolic SAR dots will stay above the candlestick.
- When the asset has a very strong trend either Bullish or Bearish the distance between Parabolic SAR and Candlestick will be big. and vice versa the distance will be small in case of a weak trend.
Buy with the dots below the price
As, you can see above the dots are below the price and we can also see a good distance between the two so, so it signals a strong upcoming bullish trend and we can place a buy trade. however, the best time to place a buy trade will be when you see two or three continous green candles.
Sell with dots above the price
Similarly, when the dots are above the price it signals an upcoming bearish trend but you should place a sell trade when you see two or three continuous red candles as it signals a strong trend.
I took about 7 trades with Parabolic SAR and I got almost about 100% results with the same. As I love to take 1-minute or 5-minute trades so, I reduced the period duration of the indicator to 0.001 and as a trend confirmator, I used the RSI indicator with period 6. When Parabolic SAR dots were above the price plus RSI line was near line 30 I took sell trade and conversely When Parabolic SAR dots were below the price plus RSI line was near line 70 I took buy trade
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