In today's fast-paced trading world, automated trading strategies are becoming increasingly popular. They allow traders to implement complex trading
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In today’s fast-paced trading world, automated trading strategies are becoming increasingly popular. They allow traders to implement complex trading rules, enter and exit trades based on predetermined conditions, and minimize the impact of emotions on trading decisions.
One popular automated trading strategy is the Parabolic SAR EA, which uses the Parabolic SAR indicator to enter and exit trades. In this article, we’ll explore what Parabolic SAR is, how it works, and how to create an effective Parabolic SAR EA.
What is Parabolic SAR?
Parabolic SAR, or Stop and Reverse, is a technical analysis indicator used to identify potential trend reversals in the price of an asset. The indicator is represented by a series of dots that appear above or below the price chart.
The dots form a pattern that can help traders identify the direction of the trend and when to enter or exit a trade.
How Does Parabolic SAR Work?
Parabolic SAR is based on the principle that a trend will continue until there is a reversal. The indicator is calculated based on the price and time, with a higher sensitivity to price changes than time. The formula for calculating Parabolic SAR involves the following steps:
- Determine the highest high and lowest low over a specified period.
- Calculate the initial SAR value.
- Update the SAR value for each subsequent period based on the formula.
The resulting values are plotted on the price chart as dots above or below the price, depending on the trend direction.
Download the Parabolic SAR EA HERE.
Trading with Parabolic SAR EA
Parabolic SAR EA can be used to determine entry and exit points in a trade. Traders can use the indicator to identify the direction of the trend and enter trades in the direction of the trend. The following steps outline a typical long trade setup using Parabolic SAR:
4.1. Long Trade Setup
- Wait for the Parabolic SAR dots to appear below the price.
- Enter a long position when the price breaks above the high of the previous candle.
- Place a stop loss below the lowest low of the previous candle.
- Place a take profit at a predetermined level.
4.2. Short Trade Setup
- Wait for the Parabolic SAR dots to appear above the price.
- Enter a short position when the price breaks below the low of the previous candle.
- Place a stop loss above the highest high of the previous candle.
- Place a take profit at a predetermined level.
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