Resolved Question
Can anyone explain the parabolic sar?
I understand the general concept of this but this is supposed to be a leading indicator. It seems to be lagging behind the MACD, Stochastics and the RSI. I'm so confused. Can someone explain this?
4 months ago
Best Answer - Chosen by Voters
I would suggest using a combination of the indicators. It isn't advisable to rely on just one indicator - you may get with fake outs, or as you say, miss out! Try using the parabolic sar with the other indicators, like rsi or stochastics. Check to see if the parabolic sar lines are above/ below the candlesticks, then try using rsi or stochastics as a confirmation that the trend is changing.
4 months ago
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It would depend on the settings of your parabolic sar as well as the oscillators you mentioned. If the parameters on the oscillator cover a short period, it's going to move much much faster than the parabolic sar. I'd try different settings on both the parabolic sar and your oscillator and then backtest them to see what works best.
4 months ago
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I personally feel that you are looking at this tool differently than it is intended to be used. This tool is not used to lead/discover the trend, but instead to follow it. In fact, the tool was designed by welles wilder almost exclusively for trailing stops lagging behind and following the market. Normally, you use indicators like the macd or ssto to enter the market, then attach a trailing stop to a calculated stop loss indicator like the psar to protect your open order and then take you out(hopefully with a profit). A similar indicator would be the atr stop, or even the more generic dollars, pips, bars back trailing stops. Now it is possible to use the sar to enter the market or set direction, but that is not the norm or even necessarily the recommended use for the tool. You can take a look at my source link for a more in depth description. Jeff keller
track 'n trade support & education
gecko software, inc.
4 months ago
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