5.4 Trading Parabolic SAR instructions Video Lecture | Forex: Learn and Master Trading (English) - Business Basics

welcome back to capex forex trading comm
in this lesson we're going to focus on
the parabolic SAR and we're going to
show you how it can be used to get into
trends now when you first upload the
parabolic SAR it will display in your
price window it won't display in a
separate window like we have here and
when you do upload it you'll see these
dots that look a little bit strange at
first but the idea behind these dots is
that if they are above price levels
you're looking to sell and when they're
below price levels you're looking to buy
so in this instance here we have these
parabolic SAR dots above our candles so
we're looking to sell and then this
trend here or in this example here we
have a parabolic SAR dots below our
candlesticks so we're looking to buy now
unfortunately the parabolic SAR
indicator cannot be used on its own now
this isn't because it's not a reliable
indicator or it gives us incorrect
readings it is because we need two
things when we trade it we need to first
of all know whether we need to buy or a
sell and we also need to know if a trend
is taking place because without that
trend we cannot place a buy or a sell so
do you want thing that the parabolic SAR
indicator does show us is an indication
whether we should buy or sell but it
doesn't show us if a trend is taking
place and for that we need another
indicator such as the momentum indicator
now you can use an ad X indicator for
this as well or in fact any other
indicator that you're comfortable with
that provides you with an indication
that a trend is taking place now for our
purposes we're going to use the momentum
indicator but we're not going to go into
how to trade it specifically because we
have another video dedicated to that so
if you're not familiar with the momentum
indicator then please watch that video
first but if you are familiar with that
indicator then just stay in this lesson
so in general terms the momentum
indicator gives us a reading above 100
or below 100 so when we little have a
reading above 100 we know that there is
an uptrend taking place and when we have
a reading below 100 we know that there's
a downtrend taking place
so this is why we use the momentum
indicator because remember we use the
parabolic SAR indicator for an
indication to buy or sell but we used
the momentum indicator for an indication
that a trend is taking place and when we
combine those two we have a very good
formula to generate some very good
profit so let's combine these two
indicators in a couple of examples and
let's focus on a downtrend first so what
we have here is a standard downtrend and
what we also have are parabolic SAR dots
that appear above our price levels or
above these candlesticks so at this
stage the parabolic SAR is telling us
that we need to sell however we're not
sure how strong this downtrend is
because for all we know from this point
onwards this market could reverse and go
back in the upwards direction so if I
just draw a line at the point at which
the first dot is created we need to
reference the momentum indicator at this
stage and we can see that the reading is
not quite yet below the 100 level
reading so if I go on to the second dot
which is there you can see that we'll
have now crossed over the 100 or cross
under rather the 100 line so this is now
our indication to sell so this is our
entry candle here and we will generate
profit from this point down to this
point in an uptrend we'll do the
complete opposite so we have an uptrend
here and that uptrend begins at this
level and ends at that level now to
accompany that we've got the blue
parabolic SAR dots that appear below our
price levels or below our candles so if
we do the same we'll take a vertical
line and draw it at the point or place
it at the point at which the first
parabolic SAR door appears so at this
stage we need to reference the momentum
indicator and we're looking for reading
above a 100 because we're trading in the
upwards direction and to be honest this
is a little bit too close to the 100
meter line here so we would not take
this trade but what we would do is wait
for the second candle to open and as
long as we have a parabolic SAR dot
below
and the momentum reading is above 100
which is what we have here we would take
this trade so our entry would be there
with a stop loss at the beginning of the
trend or just a few pips below so that's
how you would trade the parabolic SAR in
an uptrend now there is a scenario where
the parabolic SAR is useless and that is
when we have a range bound market now a
range bound market is simply a market
with no direction so we have no uptrend
and we have no downtrend and that's the
scenario that we've got in this little
section here so you don't need any
special training or anything like that
by simply using your naked eye you can
see that the market is sort of bouncing
around there's nothing really happening
but despite that the parabolic SAR dots
will still appear because that's the job
of this indicator so what you need to do
is to make sure that despite the fact
that they are appearing that these dots
are appearing do not use the parabolic
SAR and don't combine it with any
indicator because it will not work it is
only used to trade in trending markets
and the last thing where a parabolic SAR
is also not used is when you have a dots
of both above and below your price
levels or above and below your
candlesticks don't trade it when that
appears as well wait for one side to
appear at one time and only start your
training or your combination of
indicators then now the last way in
which we can use the parabolic SAR is
that we use it as a stop loss so what we
would normally do in an uptrend is place
stop losses just below these higher lows
that the uptrend is making now when we
trade downwards what we would do is
place a stop loss just above these lower
highs that this downtrend and bacon but
when we're using the parabolic SAR what
we actually do is place stop losses
below the parabolic SAR dots when we're
trading in an uptrend and above the
parabolic SAR dots when we're trading in
a downtrend the reason for this is
because it allows us to stay in a trend
for a lot longer so he gives us that
little bit of extra room to stay in that
trend and generate much more profit so
if we were trading this uptrend here for
example
we would get out at this point here okay
so as we said it just gives you that
little bit of extra room to generate
that extra profit which is always great
okay so that concludes this lesson if
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