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Wednesday, 10 December 2008 15:41 |
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First developed by J. Wells Wilder Jr. and published in his book "New Concepts in Technical Trading Systems", the Parabolic SAR (PSAR) is used to trade from signal to signal. The math behind the SAR isn't too complicated, but complicated enough that we won't discuss it here. The important thing to remember is that it is best used in trending markets and markets that have longer swings. Using the PSAR in a ranging market will quickly deplete your account of any profits gained.
SAR stands for, Stop and Reverse. This implies that trades are taken and you are in the market all the time. When one trades stops you reverse your position and you are now in a trade going in the opposite direction. In the above chart the PSAR is represented by the green dots. In trading the PSAR you would look to go long when the dots are under the price action and short when the dots are over the price action. Most traders use a filter to more profitably trade the SAR
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ForeXecutor 
