How to use Parabolic SAR Indicator to Trade Stock & Binary Options

The Parabolic SAR indicator (or PSAR) is designed to calculate the point in time when there emerges a better than average probability of a trend switching directions.

Developed by Welles Wilder, a famous technical trader who also created the RSI indicator, the Parabolic SAR is easy to understand and is used by many traders to predict when a trend will reverse.

Visual Representation of the Parabolic SAR

On a chart, the Parabolic SAR indicator is displayed as a series of dots positioned either above or below the asset's price. A dot below the price indicates a bullish trend while a dot above the price indicates bearishness.


Parabolic SAR indicator

Stops and Reversals

A trading signal is generated whenever the series of dots reverse positions. A buy signal is generated when the dots shift from above the price to below the price. A sell signal is generated when the dots move from below the price to above the price. Traders typically wait for two or more dots to crossover before confirming the signals.

PSAR Parameters

The parabolic SAR indicator only has two parameters. They are the Acceleration Factor or AF and the maximum AF.

The Acceleration Factor affects how sensitive the PSAR indicator is to the underlying price fluctuations. The higher the AF, the more sensitive the indicator which translates into higher frequency of buy or sell signals being generated while simultaneously also reduces the strength of these signals.

Typically, the AF is defaulted to 0.01 for stock trading and 0.02 for currency trading. Maximum AF is usually set at 0.20.


Continue Reading...

RSI (Relative Strength Index) Indicator Explained

The RSI or Relative Strength Index indicator is bounded momentum based technical indicator that attempts to predict a change in momentum. ...[Read on...]

MACD Indicator Explained

MACD (usually pronounced Mac-Dee) stands for Moving Average Convergence Divergence. The MACD indicator gives the short to medium term trend of the price action...[Read on...]

Bollinger Bands Explained

The bollinger bands are adaptive trading bands that reflect changes in volatility and provide a better view of the true extent of the price action....[Read on...]

Parabolic SAR Explained

The Parabolic SAR indicator (or PSAR) is designed to calculate the point in time when there emerges a better than average probability of a trend switching directions.... [Read on...]

ADX Indicator Explained

The ADX, or Average Directional Index measures the strength of a trend and can be useful to determine whether an asset is currently in a trending market or a ranging market...[Read on...]



Follow Us on Facebook to Get Daily Strategies & Tips!




Trend Indicators

Oscillators



Risk Warning: Stocks, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your account. You should not risk more than you afford to lose. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is provided strictly for informational and educational purposes only and is not intended as a trading recommendation service. TheOptionsGuide.com shall not be liable for any errors, omissions, or delays in the content, or for any actions taken in reliance thereon.

General Risk Warning:
The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.

Home | About Us | Terms of Use | Disclaimer | Privacy Policy | Sitemap

Copyright 2017. TheOptionsGuide.com - All Rights Reserved.