One of the indicators you can use to know the trend is the parabolic SAR. “Stop and reverse” is the literal definition of SAR. The indicator tracks the price and displays the point at which the trend changes direction. It will appear as dots beneath or above the candles on the chart.
The goal of this guide is to provide you with the required information on how to configure and utilize the indicator on any trading platform.
How to trade with the Parabolic SAR indicator
You should learn to read the SAR (Parabolic SAR) indicator before we begin.
There is an uptrend when the dots under the candlesticks are visible. There is a downtrend when the dots are above the candlesticks.
When using the parabolic SAR indicator, the goal is to enter a trade when the trend reverses. When the candle hits the dots, this happens.
When the dots are below the candles and the price chart is in an uptrend, you should wait until the Parabolic SAR crosses the price chart. Now is the moment to enter a sell position as the trend will reverse. When there is a downtrend and the dots are above the candles, on the other hand, you should wait until it crosses the price chart before entering a buy position.
After the indicator crosses the price chart, look for the first SAR dot.
How to avoid unnecessary losses while using the Parabolic SAE indicator
When it comes to trading using indicators as source for entry signals, this leads to more unnecessary losses because all indicators lag behind prices and they repaint. To find better entry points, it’s better to get confirmations from candlestick patterns.
You can use the parabolic stop and reverse as a dynamic stop loss level. You can change your open position stop loss candle by candle.
The parabolic SAR indicator, which is one of the most effective, can be relied upon. However, keep in mind that it only works at extended intervals. If you wish to trade a 1-minute timeframe, don’t use it. Small price swings will work against you in this instance, and you can easily lose money. Main trends, as shown in the graphs above, work over a longer period of time. And you can see larger and smaller price swings inside them. As a result, you should opt for lengthier or higher intervals. It’s only that the dominant tendency is more likely to last for a longer period of time.