In 1978 in his book "New Concepts in Technical Trading", j. Welles Wilder introduced the Parabolic SAR (commonly abbreviated as its mention being only with the SAR only) along with RSI as one of the main indicators in trading. Own is short for SAR Stop And Reverse more or less defined as the determining point of Stop Loss indicator in trading.
In its development in the future, Parabolic SAR becomes one of effective indicators in determining the ongoing trend of market conditions (trending market) along with being named a lot of Trailing Distance is provided on a wide range of forex trading platform.
The Use Of Parabolic SAR
Uses exactly the same Parabolic SAR with Moving Average or trend indicator, etc. It's just that Wilder created this indicator to mengeliminir shortage MA i.e. its form curve so often occurs e.g. interpretations. With the SAR in the form of points, rising or falling trend becomes more certain and appears to no longer give rise to misinterpretation.
In the SAR, as prices are in the trend of climbing, then the SAR under point of price movement. Instead, when the market was in a down trend then the SAR points are at the top of the price movement. Consider the following image:
In the image above appears to be above the SAR point bar which indicates that the price trend was down.
Now let's look at the picture below:
As already mentioned above, an excess of Parabolic SAR is how it looks in the form of points and thus makes it easier for a person in the reading State of the market. Traders saw enough where the SAR point position is below or above the bar to determine the trend is happening.
More than that, the farther the distance between the point of the SAR with the highest price or the lowest of the bar, the stronger the trend showed up/down happens.
Once you know how to read the Parabolic SAR, I think now it's easier to use it to do action a sell or buy, hold. Need to be presented here, that it is very recommended to use SAR with other indicators (I personally recommend adding it with an oscillator indicator like RSI or Stochastic).
This is the same as the other, often an indicator of trend indicators of this kind of sluggish in accommodating changes in prices. Likewise with the SAR. That is why it is recommended to add an oscillator which tend to be faster so the two can be mutually offsetting. SAR can reduce speed Oscillator and Oscillator can be valid otherwise.
Let us look at the picture below:
In the area that I've circled with purple is the second confirmation indicator shows the same direction. Stochastic signal that prices are rising and the trend is in the point of the SAR are also currently under which also shows the price moves up. Buy action can be done in these circumstances.
The second purple circles on the right also shows the same case but better results because apparently the SAR and Stochastic point indicates the condition of the uptrend but in a State where the uptrend has just begun. Thus the advantage gained can be much larger than the first purple circle.
Simple isn't it? You can integrate SAR with other indicators such as MACD or RSI with dependent indicators which best suit your trading style everyday. Please bear in mind here that every trader has his favorite indicators respectively.
Parabolic SAR and Stop Loss
Well we got in a discussion of the usefulness of the SAR are quite unique here. Even just the SAR has the ability like this which uses SAR as the determining point of Stop Loss. Remember that the SAR is short for Stop and Reverse more or less means stop and reverses direction.
Point of the SAR not only can be used as a decisive trend up or down trend. Similarly, the distance between the point of lowest price or the SAR had the highest bar is not only can be used as a strong determinant of the weakness of a trend going on. More than that, if you are a trader with Stop Loss (trading strongly recommended using the Stop), then the good news you can use SAR point sebabagi Your Stop Loss point.
Some of the newcomers are mostly very hate this one facility, namely the Stop Loss. The reason is because if they put up a Stop Loss so often times they touch the Stop point of the position which means it is a loss for them. Finally they opted to let the price terfloating with santainya while waiting for the night "ended" and "morning glow" aka the price reverses direction so that their negative positions changed with the positive.
The bad news for those who trade in this way is that the time will come where maybe the night would never end and never come morning aka margin call occurs. It's not just one or two times I see it, but most of those who trade without a stop loss invariably leads to the same abyss. Something has I would say thousands of times to any investor newbies who amazingly are very rarely observed.
Remember my brother, the Stop Loss is not to make You a loser. He is there to limit your losses and distancing yourself from nightmare called margin call. Of course you don't want to not trade just a coupla times and then smashed just because there is one position that is wrong. None trader never wrong in determining position. Even I who wrote this article was often mired because of fault position. It doesn't matter how many times you were wrong in determining position in the aggregate that matters is keeping your profit!
Now let's get back to the discussion of SAR and Our Stop Loss. It deviated too far this ...
Note the picture below:
Well in the picture above shown that when the SAR point moved from above to below, then it is an indication of the downtrend has been completed and resumed its uptrend. In such conditions, then it is time to do the Buy action. But as we understand together that however We cannot confirm 100% that prices will continue to rise. Thus we need to use limit Stop Loss (SL) in the open position. The lowest point of the SAR can we use that as a benchmark.
You can also use the facilities at the combine that with SAR facilities trailing distance on the platform. Different with Stop Loss that are static and cannot be shifted automatically, a trailing Stop-Loss is a dynamic or can move follows price movements.
For example in the image above, if you open a Buy position on the price it means that there is a distance of 1.9635 44 point with the point of your first Stop (1.9635-1.9591). That means you can determine that the distance Stop you shouldn't be more than 44 points if you are using a Traling Distance as your Stop. If the price moves up to 1.9700 then automatically Stop Loss you will move to a permanent alias 1.9656 44 point if you use the Stop Loss with model Trailing Distance.
Most of the forex trading platform provides facilities to its customers. trailing If you are a SAR users, you might need to use this facility.
On the platform GAIN Capital (Forex.com) also there is this facility. Basically the opening position and add point trail is one of the very good steps in determining the policies of our profit. With the trail, You no longer need to add the Limit as a limitation of your benefit. Trailing can be useful as a Stop Loss and also Limit. The picture below is the trail facilities on the platforms: forex.com
The restrictions on the Parabolic SAR
We have been studying the various aspects of this indicator. SAR is very effective used in various conditions trending market. However there are times where SAR is ineffective and cannot be used as the main indicator.
When was that?
Precisely when the market is moving sideways or in situations of absence of trend of price movement. The condition is characterized by sideways his close the distance between the point of the SAR with the highest/lowest price there. Sideways is worse condition characterized by berpindah-pindahnya point of SAR above and below the bar so it makes it difficult for us in the open position. That is why from the beginning I would suggest using the SAR as well as other indicators in closing short of the SAR.
Consider the following image:
If you are using trend indicators such as Moving Average curve-shaped, then it would appear to be moving mutual MA twisted between two different periods. So also with the Stochastic.
This sideways situation usually happens when market is closed or the market participants were waiting for important news that will soon emerge. It is advisable to position opening is not done at the time of sideways. Unless you're willing to wait long enough and strong enough mentally to see terfloating position for so long.
Well, until Our discussion here about Parabolic SAR. Now we learn the indicators recently named Bollinger Bands.
Bollinger Bands
Created by John Bollinger in the early 1980 's to help compare volatility and relative price in a period of analysis. Bollinger bands themselves are actually made up of three lines that form a sort of limiting belt against price movement. However, in its application to the midline Bollinger Bands are often not shown because it is simply the midline line Moving Averages is unusual. Consider the following image:
As already explained above, the Bollinger Bands themselves resemble a belt to be hedged price movement. Did you find something from the picture above? Yes, in the event of an inefficient provision between demand and supply, the Bollinger Bands will widen more than the balanced condition.
As an example of the above picture. The graph display the GBPUSD 1 h on May 2, 2007. Appears when there are price increases then the belt inflates is so fine compared to the situation at the moment there is no trend trend or not strong enough. Even at any given moment the belt becomes so narrowed. Such circumstances may be will indicate two possibilities. The first is because the transaction was indeed really empty or both is because most market participants are waiting for the news to perform purchase/sale next.
As a volatility indicator, actual Bollinger Bands can not stand on its own. This indicator is usually used only as a preliminary indicator to measure relative price and volatility (volatile = volatile – volatility = rate of speed in the turns). Bollinger Bands indicator is not an action, so it is recommended if you are using one of these indicators, use also other indicators before making a decision to buy or sell.
Character and Use Bollinger Bands With RSI
Each indicator must have the character of each. So also with the indicators on this one. One thing that is unique is the Bollinger Bands enables each person to interpret these indicators with their respective way. Although there are several default rules in the Bollinger Bands, but it could have been a trader with other traders have different ways and different usage in using Bollinger Bands. The following is a general character applicable to the Bollinger Bands:
1 early indicator of Bollinger Bands is that cannot be used as an indicator of action.Should be used for authorized, along with other indicators. Specify one of the best indicators for you as an indicator of action, however, do not wear more than one action indicators. Some good action indicators are Stochastic and RSI, momentum. It Is Up To You.
2 in General, the prices will move in the belt, however it can also price moves outside of the belt. This can mean a reversal will occur or on the contrary the strengthening trend which is ongoing. To find out we can see an indicator of action that we are taking.
3 the determination period in the Bollinger Bands also effect here. The smaller the period used the width of the belt will be getting smaller and vice versa.
If Bollinger Bands We therefore RSI, combine with the result:
1 If the price is outside the upper band or similar, while the RSI is still under the overbought zone, then this means there will be a continuation of the trend that is going on. On the contrary when the RSI had been overbought and are situated along left the overbought area, then this means there will be a reversal of the trend in some candle in the future.
2 when the price was lower or the same band outside, while the RSI is still below the oversold zone, then this means there will be a continuation of the trend that is going on. On the contrary when the RSI had been oversold and are situated along abandoned areas oversold, then this means there will be a reversal of the trend in some candle in the future.
Well, let's look at the following picture:
Note the area circled a large smoothing and RSI. At 1.1932, large smoothing RSI is 39.9429 and prices penetrated the upper band has twice in a row. This indicates that there will be a continuation of the trend has just begun. The price rise was recorded several times, also the price broke through the upper band but the RSI has not yet left the overbought area. This means the trend still continues to occur until the RSI leaves the overbought area.
Now compare with the picture below:
In the area that I've circled smoothing RSI value 31.7379 and the price has to penetrate the lower band three times with bullish candle. Thus the predicted trend reversal shall be as shown in the next candle. Why I can give estimates that there will be a reversal of trend from bearish to bullish? That's because in addition to indicators of action I suggest prices have left the oversold area and leads towards the overbought area.
Can be deduced from the use of the example here, the actual design Bollinger Bands with other indicators we can do when we understand the use of these other indicators correctly. The use of appropriate indicators will make the decisions that corroborate and support so that obtained a variety of advantages. The more we understand the use of indicators of action then the greater chance We make use of Bollinger Bands as a volatilitiy indicator.
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