When it comes down to extensive research on different investment techniques, technical indicators are a great place to take start. In this fast paced technology controlled era, private traders and officials make use of these technical indicators mainly in their technical analysis. In order to understand the behavior and the latest trends in the financial markets. However, a common technical indicator, which is primarily used to understand the up and the low market trends, is called the Parabolic SAR.
What is a Parabolic SAR?
A Parabolic SAR, more commonly known as ‘the stop and reverse system’, is a technical indicator, which was initially devised by J Welles Wilder, and was primarily discussed in one of his books published back in 1978 – ‘New Concepts in Technical Trading Systems’.
This technical indicator mainly follows the price action, and is therefore considered to be one of the best trend following indicators in the financial market. When shown on a cart by a professional chartist, a Parabolic SAR takes the form of a series of dots, which are either placed above, or below the price of an asset. The dots are usually shown below the price level when the prices are rising in the market, whilst the same dots would appear above the price level if the prices are falling.
How to Use Parabolic SAR?
Ø Used in Trading:
Used commonly to determine the prices, a Parabolic SAR is exceptionally easy to use. The simple formula is that when the dots are below the candles on the chart, it is time to buy and invest. However, when the dots are above the candles, it is time to sell the assets.
Ø Used to Exit Trades:
In order to close your trade with your fellow marketers, you need to make sure that you use a Parabolic SAR. This technical indicator works as a exit signal, and provides you with a green single when to seal the deal.
Benefits of a Parabolic SAR:
It provides help in predicting a stocks correct direction, while proportioning a stock-loss order as well. Although not very useful in times of consolidation, a Parabolic SAR can provide you with a lot of help in trending environment.
Moreover, it provides you with a head-start on all the moves which will take place during the next few months, and helps you in gaining an edge over your competitors. On top of everything else, the key benefit of a Parabolic SAR is that it can easily be implemented in any sort of financial strategy you might come up with.
The Bottom Line:
In order for investors, traders and officials to stay ahead of a clutter of competition in the 21st Century financial markets, using the best indicators is of utmost importance.
Moreover, to understand when the trends are high and when the trends low, using Parabolic SAR can be extremely helpful. Hence, if you’re looking for a huge competitive advantage before you invest, make sure to use Parabolic SAR as your technical indicator.