Concept of Simple SAR Indicator

The simple SAR indicator shows trend reversals and it is the combination of two Moving Average Crosses and the Parabolic SAR. People consider it as one of the most reliable indicators and are the oldest indicator also.

The indicator provides you with information about your trading and can also help you with setting the trading opportunities. The various features of this indicator are it is easy to use, it provides accurate information about trading, and it provides alerts and signals on your mobile phones directly. It is also compatible with various platforms and it has an advanced indicator set to facilitate easy working.

Working of Simple SAR Indicator

The Simple SAR indicator provides 11 plots. These plots provide various pieces of information as plots mark the entry in the trading with an arrow and they also provide the entry price of a particular position until that position closes. Along with the price of a particular position, these plots also tell the profit or loss associated with that particular position until that position closes.

The indicator helps you to find out the exact movement of change in price direction. It is the point where both the Moving Average Cross and the Parabolic SAR come into use as the change in price direction is done by waiting for a moving average cross and then entering the trade at the appropriate motion with the help of the Parabolic SAR. So, to understand the working structure of the Simple SAR Indicator, the traders need to properly understand the meaning of Parabolic SAR, its working style and the pros and cons of the Parabolic SAR.

Concept of Parabolic SAR Indicator

The Parabolic SAR indicator is a technical indicator with the help of which the traders can find out the short-term momentum in the price bars. It also helps the traders in the placement of stop orders in the asset chart. Also, there is an assumption made by the Parabolic SAR indicator that the trader at any point of time is fully invested and he is at his optimum position when the market trends are steady and he suffers no losses in this situation.

Since it assumes that the trader is fully invested, it is more beneficial and of interest to the traders who have developed trading systems.

Importance of Parabolic SAR Indicator

The Parabolic SAR is very important indicator as it is not possible to enter trading without the help of the parabolic SAR as sometimes there are cases when the moving averages cross each other frequently and to eliminate this, we need the Parabolic SAR.

Working of Parabolic SAR Indicator

A set of dots in the chart of assets represent the Parabolic SAR. The main motive of Parabolic SAR is to help the trader when to buy and sell in trading activities. The dots are placed along the price bars.

Parabolic SAR represents a sell signal when the dots are above the price bars. This trend is also called a downward trend and when the dots are below the price bars, it represents the upward trends. The upward trend gives a buy signal to the trader. But when there are frequent fluctuations in the market conditions, then the traders need not trust this indicator completely as it can provide false and misleading signals.

The Parabolic SAR helps the traders to enter the market when the market trend is steady, entry at this point will help to earn higher profits. When there is sideways movement in the price, it means that the traders will earn small profits or can even suffer small losses. Then the Parabolic SAR helps the trader to stop-loss orders.

The Parabolic SAR indicator helps in trading as it helps the trader to stop at the position where there is profit and it always takes the user closer to the market condition and never far away from the actual market condition. The Parabolic SAR indicator helps you to understand the market conditions properly and if the market conditions are not in your favour, then you can also stop and revert from that position until the position where you suffer no losses.

Calculation of Parabolic SAR Indicator

The calculation of Parabolic SAR is usually a difficult and complex task for the traders but its calculation can help them to understand the upward and downward market trends easily. Various factors have their role in the representation of the dots in the asset charts. And the Parabolic SAR uses the acceleration factor as well as the highest and lowest prices for its calculation and representation of dots in the asset charts.

For understanding the calculation of Parabolic SAR, we need to understand the meaning of various terms such as EP and AF. EP refers to the highest or the lowest price that the price bar reaches. In other words, it is the extreme of the price bar. AF refers to the Acceleration factor. The traders before calculating the Parabolic SAR can set the AF according to their trading style and or according to the instrument they trade. Usually, the value of AF ranges from 0.02 to 0.20.   

Upward Parabolic Trend refers to the summation of the Prior SAR and Prior AF. For calculating the Prior AF we need to subtract Prior SAR from Prior EP.

Downward Parabolic Trend can be calculated by subtracting the Prior AF from the Prior SAR. To get the value of Prior AF, we need to subtract Prior EP from Prior SAR.

Advantages and Disadvantages of Parabolic SAR Indicator

One of the biggest advantages of the Parabolic SAR Indicator is that when the market conditions are steady, it provides good and accurate results to the traders. Along with this, it also helps them to price action direction and help them earn higher profits.

But the major disadvantage is that if the market trends are fluctuating, then it gives false and misleading signals leading to losses to the traders.

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So, if the traders want to make full use of the Simple SAR Indicator, they need to focus on understanding the working of Parabolic SAR efficiently.

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