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Today, In this article. I going to discuss one of the most popular and high-quality trading indicators i.e Parabolic SAR. so, keep reading ahead in this article, I will share everything about Parabolic SAR and how to use Parabolic sar on Pocket Option.
What is Parabolic SAR
Formulla: SAR n+ 1 = SARn + α ( EP – SARn )
where SARn and SAR n +1 represents the current and next period SAR values.
EP = Extreme point. that represents the highest value reached by the price during the current period and the lowest value during a downtrend.
Parabolic SAR is a trend indicator that helps to spot upcoming trends and reversals. the indicator is a very unique indicator as it is made from the composition of dots that are placed above or below the price of the asset.
Parabolic SAR or Parabolic stop and reverse was developed by J. Welles Wilder in 1978. you can find his original piece of work in his book named ‘New Concepts in Technical Trading Systems’. I will suggest you read this book once in your life. you can easily get this book on amazon and in this book, you will also get the chapters on RSI (Relative Strength Index), ATR (Average true range), Adx ( Directional movement concept ) & more.
Key Points
- Parabolic SAR or PSAR is a trend indicator via which you can identify the upcoming trends and reversals.
- This indicator was developed by J. Welles Wilder in 1978, you can find his original masterpiece in his book name New Concepts in Technical Trading Systems.
- Parabolic SAR is a very unique trend indicator that oscillates around the price in the form of dots.
- When you see the dots above the price it signals an upcoming bearish trend
- When you see the below the price it signals an upcoming bullish trend.
- For better results, you can use the conjunction of two trend indicators with Parabolic SAR.
How to configure Parabolic SAR on Pocket Option
First of all, you need to have a Pocket Option account. In case you don’t have one click here. once you have signed up, make sure to set the chart to the candlestick.
Now, click on the indicators button and select Parabolic SAR from the menu.
Pros & Cons of Parabolic SAR
Pros
- Helps in analysing the price movement of security
- Simple to use
- Highly effective
Cons
- Does not guarantee 100% results
How to trade with Parabolic SAR on Pocket Option
Trading with Parabolic SAR is very easy. as I said above the indicator is made from a series of dots. which ribbons are around the price. when the dots are below the price it indicates a bullish trend similarly, when the dots are above the price it indicates a bearish trend. when we witness a big gap between the price and dots it indicates a strong trend.
Place buy trade with dots below
When the indicator dots are below the price it signals a bullish trend. however, the best time to place a buy trade is when we see a big gap between the price and the indicator.
Place sell trade with dots above
Similarly, when the dots are above the price it signals a bearish trend. however, the best time to place a sell trade is when there is a big gap between the price and the dots.
So, this is how you should trade with Parabolic SAR. you can even combine the indicator with trend indicators like RSI, Stochastic & more. this combination has a huge potential of giving you high-quality trades just remember to use proper money management for the best results. so, just go and try this indicator on the Pocket Option demo account and you have practised well enough. shift to Pocket Option real account.
