Wednesday, November 25, 2009

Stock Tehnical Indicator: Parabolic Stop And Reversal (SAR)

Parabolic Stop And Reversal is also known as Parabolic SAR. This indicator shows the trend of certain stocks and stock traders can take position of buying and selling according to the indicator.

Parabolic SAR indicator is useful and quite accurate in strong trend market. Stock traders can buy and sell according to the indicator. Basically, parabolic SAR indicator shows that the market always move up and down. By referring to this indicator, you can actually see whether the trend is moving upward or moving downward. Parabolic SAR indicator is useful as a reference for stock traders to learn the trend of the market. It is important to know the market trend if you are a stock trader because following the right trend can help you to succeed in stock trading.

Why Following the Trend:
Trend following is like swimming in the sea. If you are swimming at the same direction of the sea current, you can swim with ease.But, if you are swimming against the current, then you will find it hard to swim and you get exhausted easily.

So, knowing the trend of the stock market is very important to trade stock with ease and parabolic SAR indicator can be a guidance for you to know the trend of the market.

An example of Parabolic SAR Trade:

The picture (taken from ChartNexus) above is the chart of GENTING. The picture shows the Parabolic SAR indicator which is indicated as Green dots and Red dots in the chart. The Green dot shows the up trend while Red dots shows the down trend.

From the picture, it ca be seen that a Buy Signal is created when the price move above the Red dots and Sell Signal is created when price move below the Green dots. This is a successful trade using Parabolic SAR in a strong trend market. [Please click on the picture to see the notes I wrote on it.]

Parabolic SAR indicator can show the trend of the market. If you can spot the trend and buy at the correct trend, then you can trade successfully in the stock market.

Note: It is advisable to refer to multiple indicators to confirm a trade.


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