Despite the difficult name, the indicator Parabolic SAR is an analog of the Moving Average. It is used to calculate the average value of the price in the past but it can also help to predict the future course of events. It is represented with a dotted line (blue dots). When this dotted line is located below the price chart, it means that the market is an uptrend now (the price goes up). And when it is located above the chart, the market is a downtrend (the price goes down). Knowing this, you can use the indicator Parabolic SAR in your trading.
Features of the strategy:
Easy to use
Only one standard indicator is needed
The signals are given by the indicator itself
The system is very simple and easy to understand
Trading does not require much preparation
Any currency pair and time-frame can be used.
Parabolic SAR shows the entry points perfectly.
If the price chart crosses the dotted line (for example, from top to bottom), Parabolic is reversed and then is being shown from the opposite side (below the chart). So, the reversal of the indicator is a signal that either trend is ending or that it’s going to reverse (for example, if it was ascending, it is going to descend).
Use the following time periods:
Candle time frame – 5 minutes = trading time – 5 minutes
Candle time frame – 15 minutes = trading time – 15 minutes
You should trade UP when the dot ABOVE the candlestick is replaced by the dot UNDER the candlestick and the indicator starts being shown under the chart.
The first dot after the change of the trend should be taken into account.
The second dot should be viewed as the signal to trade UP with the selected financial instrument.
You should trade DOWN when the dot UNDER the candlestick is replaced by the dot ABOVE the candlestick and the indicator starts being shown above the chart.
The first dot after the change of trend should be taken into account.
The second dot should be viewed as the signal to trade DOWN with the selected financial instrument.
1. Always use the same time period.
2. Invest less than 5% of your account balance per one trade.
3. Try to use fixed amounts in trading.
It will not be long before you learn how to use the chart and notice good opportunities for trading. Good luck!