Trading with the Parabolic SAR Indicator on JustMarkets

The Parabolic SAR is a widely used trends indicator in technical analysis and now its primary function is to define potential reversal points, to help to determine entry and exit points. The Parabolic SAR can be very effective for traders who seek to have a better understanding of their instrument of trading and the current market situation. In this guide, we’ll explain what Parabolic SAR is and how to work with this indicator on JustMarkets.

Understanding the Parabolic SAR Indicator

The Parabolic Stop and Reverse (SAR) is another spot indicator created by J. Welles Wilder which consists of dots positioned either above or below the price movement. If the dots are below the price they are uptrend and dots above the price are downtrend. The indicator rises and tends to horizontal, oscillating around the price, getting closer to the price at the steeper slope. JustMarkets provides a range of educational resources, including the JustMarkets Learning Hub, which offers insights into various trading strategies that can help you identify the right assets for your watchlist.

Setting Up the Parabolic SAR on JustMarkets

JustMarkets provides a convenient and simple procedure for applying the Parabolic SAR indicator. Follow these steps:

Log in to Your Account

Log into your JustMarkets trading account and find the trading instrument of your choice.

Access the Chart

To begin your analysis, open the chart of the instrument you are interested in trading and ensure the time frame is well-suited for your trading. To make an analysis, first, open the chart of the particular instrument in which one is interested and make sure to take a time frame that is appropriate for one’s trading habits.

Add the Parabolic SAR Indicator

In the charting tools section, you will find the indicators menu, then select the Parabolic SARs option from the list that appears. The values of step default to 0.02 and maximum to 0.2; however, these settings can be changed by the character of the market environment, although these defaults are usually optimal for most trades.

Analyze the Trend

Search for the position of SAR dots about price movements. Price placement of dots below the price signifies an upward trend, which is a buy signal while dots placed above the price indicate a downward trend, which is a sell signal.

For specific trading questions or concerns about trading, JustMarkets provides comprehensive Support for Forex Traders that supplies helpful information to enhance the knowledge of indicators and trading information. This supporting tool can assist you in getting the knowledge you need when it comes to employing indicators such as SAR (Parabolic).

Using the Parabolic SAR in a Trading Strategy

Once the Parabolic SAR is set up on your chart, you can incorporate it into your trading strategy by following these steps:

Identify Trend Direction

The first element of the application of Parabolic SAR is to determine if the market’s direction is upward or downward. Looking at the dots below the price, it indicates that the trend is up and one should go for buying. When the dots are placed above the price it suggests a downward trend and hence may be an interesting place to sell.

Determine Entry and Exit Points

See how well the PARABOLIC SAR works in identifying entry and exit signals in the chart below. For instance, if the SAR dots are below the price, and they are moving to above the price it indicates a switch from an upward trend to a downward trend which can trigger an exit signal if one is selling longs. The same applies to short positions where the SAR goes below the price imputing an exit from short trades.

Set Stop Losses and Take Profits

The Parabolic SAR can also be a good trailing stop. As the dots get nearer the price they can assist in placing dynamic stop loss which will follow the price movements. This approach minimizes profit risk while enabling the potential for additional profit that return on equity does not allow for.

Avoiding Whipsaws

While in choppy markets it will tend to generate numerous stop-and-reverse signals that are usually disadvantageous, known as whipsaws. The Parabolic SAR can be used in conjunction with other indicators such as the Moving Average or Relative Strength Index (RSI) which offer further assurance of the prevailing trend’s vigor.

Conclusion

Following these step-by-step procedures and also heeding the above outlined tips you can improve your trading strategy on JustMarkets using the Parabolic SAR indicator. Just always be aware that practice makes perfect and knowing your market is vital for trading.