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.

parabolic sar strategy

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.

Receiving signals

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

Trading “UP”

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.

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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.

parabolic sar strategy pdf

Trading “DOWN”

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.

parabolic sar and stochastic strategy

OLYMP TRADE Recommendations

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!

DISCLAIMER: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, stocks and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. The highly leveraged nature of futures trading means that small market movements will have a great impact on your trading account and this can work against you, leading to large losses or can work for you, leading to large gains.

If the market moves against you, you may sustain a total loss greater than the amount you deposited into your account. You are responsible for all the risks and financial resources you use and for the chosen trading system. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor.

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All trading strategies are used at your own risk.

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