Saturday, November 25, 2017

Forex Parabolic SAR Indicator Explained

March 11, 2010 by  
Filed under Fx Indicator

The parabolic SAR is a tool that is developed by the same person creating the RSI, Welles Wilder. It is a very simple indicator that is mainly used to indicate the end of a trend or the setting of stop loss by some traders.

The SAR behind the word Parabolic refers to Stop And Reversal which can help traders to identify entry and exit position of their trading position. This indicator makes use of dots as a visual tool to help traders clearly identify the direction of the price movement. When the trend is up, the dots will be under the candlesticks and when the trend reverses to down, the dots will flip side to be formed above the candlesticks.

How To use Parabolic SAR

Basically, the parabolic SAR is a simple to use tool that can help to give forex buy sell signals to traders. When the dots are formed below the candles, it is a BUY signals and when the dots are formed above the candles, it indicates a SELL signals.

Buy Signal

SELL Signal

SELL Signal

However, it is best to use this tool together with the help of trend. To be able to trade successfully with parabolic SAR, you should first identify the long and short term trend of the market and then place your trade in the direction of the trend according to the signals given by the SAR.

In addition, the parabolic SAR should always be used with other forex indicators such as MACD, RSI, Stochastic or Bollinger Bands for better results.

Advantage of Parabolic SAR Indicator

– It is a very simple to use indicator as you just have to look at the position of the dot to understand what it is conveying to you.

– You do not have to make any calculation as it is all automatically calculated by the program of your trading platform.

Disadvantage of Parabolic SAR Indicator

– It creates too many signals within a period of time as the price moves up and down.

As a whole, the PSAR is a good tool to use if it is combined properly with other indicators.

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Comments

7 Responses to “Forex Parabolic SAR Indicator Explained”
  1. Mohd Fahd says:

    Hi Kevin,

    Nice to watching your video in youtube about PSAR, RSI, and others tips you are sharing.

    I am beginner (newbie) in this forex trading market. I need some advises and recommendation from you which broker or company can I start best with.

    Thanks.

  2. Anthony says:

    Kelvin, Where should I put my target profit if I use this parabolic SAR method for trading? Thanks

    • Kelvin says:

      Hi Anthony

      It really depends on you. You could use the next major support and resistance level for your target profit or you could also make use of the parabolic flip as your target profit.

  3. ForexEnvy says:

    Hi Kelvin,

    I always appreciate your helpful information.

    Just one thing. What is your setting for this PSAR?

    My trading platform has default:

    step: 0.02
    maximum: 0.2

    Thank you,

    Sungyoul

  4. Adegoke says:

    Am a begginer in forex market I need best indicator that I can relly on for trading.

    • Kelvin says:

      Hi Adegoke

      There is no best forex indicator in trading, it all depends on the type of trading strategies you are using. Some indicators work well in certain strategy but fail badly on other strategy.

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