Lesson #34 Understanding Parabolic SAR Indicator

Parabolic SAR Calculation

It is very important to learn how to spot and catch the beginning of new market trends. There are several market indicators that you can use to spot these trends.

However, it is also equally important for you to learn how to identify the end point of trends. In this way, you will know how to enter and exit on a trade in a very timely fashion.

The Parabolic Stop And Reversal (SAR) indicator is probably the best tool to use in identifying where the trend will end. In a Parabolic SAR, dots or points are utilized to mark several areas on the chart where potential reversals of price movements might occur.

The chart shows that during an upward trend, the dots shift from below the candles to above when a reversal or a downward movement happens.

How to Use Parabolic SAR

The Parabolic SAR is very easy to use because of its simplicity. This is probably the best aspect of Parabolic SAR. If you see the dots are below the candles, then it is a clear signal for you to buy. When the dots are above the candles, then that is the time to buy.

Parabolic SAR is very easy to interpret because it simply indicates the assumption of up or down price movements. If you are engaged in a trending market with long rallies and downturn movements, then this indicator would be very useful.