Forex Online Trading? Parabolic SAR As a Trading Tool
The interest in trading Forex online has become popular in recent years. At the online trading platforms are a lot of free advanced trading tools that is useful in analyzing the market. It can be difficult to decide which trading tool that is best in the present market situation. Some of the tools are useful in a trending market where the prices are going up and down. Others are useful in a fading market where the prices rise to an extreme high level or reverse to an extremely low and then return to a realistic level.
One way to find the right trading tool is to consider the market situation. Is the market fading or trendy? It is also important to test which tools that generate the most profit and is comfortable as a trading tool for the trader. A test could be 20 trades with the simple moving average as a primary indicator and the stochastic oscillator as a secondary indicator. Another test could be the Bolling Bands as a primary indicator and the stochastic oscillator as a secondary indicator. It is advisable to test different trading tools during the year to improve trading skills and profit margin.
One of the trading tools the platforms offer is the Parabolic SAR tool. SAR stands for stop and reverse. It is a tool that is useful in a trending market. A trending market occurs in approximately 30 percent of the trading time. The Parabolic SAR helps the trader identifying when to buy and sell. It also helps the trader identifying the trend direction in the market.
The Parabolic SAR consists of a line that is above the price line when the market is bearish and below the price line when the market is bullish. A bullish market is a market where the prices are moving forward and a bearish market is a market where the prices are moving downward.
As SAR stands for stop and reverse it is easy to use the Parabolic SAR as a stop-loss order. When the line stop the market trend reverse. In other word if the market is bearish and the line stops it is an indication to buy and if the market is bullish and the line stops it is an indication to sell.
A test could be 20 trades with the simple moving average as a primary indicator and Parabolic SAR and the stochastic oscillator as a secondary indicator.
Written by: Martin Grippen