The Parabolic SAR (Stop And Reverse) is a technical analysis tool that is used by traders to identify possible trend reversals.
It is a simple System that is based on the concept of price momentum and trend strength.
The Parabolic SAR consists of a series of dots that are placed either above or below the price of an asset, depending on the direction of the trend.
When the price crosses the dots, it is seen as a signal to either buy or sell. Day traders often use this System to identify short-term trends and to make quick trading decisions.
The Parabolic SAR is plotted as a series of dots below the price when the trend is bullish and above the price when the trend is bearish.
When the price is above the dots, it is seen as a bullish signal and traders may consider buying the asset.
Conversely, when the price is below the dots, it is seen as a bearish signal and traders may consider selling the asset.
The Parabolic SAR is a useful tool for day traders who want to take advantage of short-term price movements and make quick profits.
Day Trading with Parabolic Sar System: Buy Condition
- Look for the Parabolic SAR dots to be below the price action, indicating a bullish trend.
- Wait for a pullback or dip in price.
- Once the price bounces off the support level, and a new candlestick opens, go long (buy) at the opening price.
Day Trading with Parabolic Sar System: Sell Condition
- The Parabolic SAR dots should be above the price candlesticks.
- The price should be in a downtrend.
- Wait for the current candlestick to close, and place a sell order below the low of that candlestick.
- Set the stop loss above the highest high of the last two candles.