EURUSD 1.1694 USDJPY 111.43 USDCAD 1.2483 EURCZK 26.028 USDCZK 22.253 EURPLN 4.2540 USDPLN 3.6377
EURUSD 1.1694 USDJPY 111.43 USDCAD 1.2483 EURCZK 26.028 USDCZK 22.253 EURPLN 4.2540 USDPLN 3.6377

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Parabolic SAR is an easy to use trend indicator, representing in a graphical way potential points of trend reversal

Rule of thumb

Depending on the settings, Parabolic SAR may follow the market prices closely and react faster

 

However, this comes  at a price of an increased number of false signals

The Parabolic SAR indicator, created by Welles Wilder, is based on a rather complex formula, but it is rather straightforward to use. Once applied to a chart, it displays an array of dots below or above  the current market price.

 

Parabolic SAR, indicator, chart, dots

 

The dots represent the points of possible reversal of the current market tendency. As follows, the dots in the case of an ascending trend, will be placed below the current price, whereas in the case of a descending market – above it.

 

The position of the dots reflects the dynamics of the current trend. The more the dots are spread apart, the stronger and more dynamic the trend movements are. On the other hand, as long as the dots are very close together, the price changes are not very significant.

 

As Parabolic SAR dots trail the market price, functioning in the same manner as trailing stops. In the case of an ascending trend, the dots will rise with the market, but the moment when prices start moving down, they will stay  at the same level. The moment of trend reversal is when prices cross a dot. In the case of change from a bull to a bear market, the market price would have to come lower than the dot level.

 

How to use it with MetaTrader 5:

  • Select a chart for which you want the Parabolic SAR indicator to be displayed.
  • Go to: Insert - Indicators - Trend - Parabolic SAR.
  • Parabolic SAR will be automatically presented  by MetaTrader 5 in the chart.

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