How to use parabolic sar effectively – parabolic sar trading strategy

Do you want to know more about momentum indicators and how to determine it? Watch our latest video to find out how to use parabolic sar effectively and get profitable trading results.

How to use parabolic sar effectively in your trading strategies

The parabolic SAR system uses the parabolic SAR indicator to determine the short-term momentum. The parabolic SAR is typically used to determine where a stop loss order should be placed. When using the parabolic SAR system, it assumes that the trader is fully invested in the market. In other words, you are either long or short, and never flat.

The parabolic SAR is a series of dots placed on the graph, either above or below the current price depending on the momentum. A small dot is placed below the price when the trend of the asset is upward, while a dot is placed above the price when the trend is downward. The accompanying DAX chart shows various places where trade signals are triggered.

When the dots switch sides of price, it means that you should be going in the other direction. Stop losses are moved right along with the dots, as it tells the trader when the potential move is over. The biggest issue is that you need some type of trend of though, so the parabolic SAR tends to do better in moving markets, as opposed to consolidation.

By allowing the calculation to determine your stop loss, it allows you to stay and capture as much of the move as possible. It also tells you which direction that most of the momentum is heading in, and therefore get you on the right side of the trade. This indicator is typically used for short-term trading systems and quite often is used in conjunction with other systems.