Using Parabolic SAR The application of this indicator relatively simple, because Parabolic SAR suggests that the market could be only in one condition – uptrend or downtrend. As other trend indicators it gives excellent results on trending markets with long swings and much less satisfactory results on ranging markets. The problem still, as you understand, is the same –we can’t know in advance if the market will be ranging market or trending… But, in general, when dashes/dots of indicator are above price – it’s a Sell signal, if dash/dots are below price action – it’s a Buy signal. Chart #2 | EUR/USD Weekly and Parabolic SAR Also Parabolic SAR could be used not only for estimation of a possible starting point of a new trend, but also the point, when this trend could come to an end. We will show you how it could be done by applying three opposite dashes: Look at chart #3. See, when three dashes have appeared in opposite direction – it’s time to exit from position. You can see it again and again. If you somehow have decided in these circumstances hold your positions despite everything – then you have been very disappointed with results… Because when Parabolic SAR has created opposite signal – market has turned to trend that is totally erased previous one. Not bad, ha? Chart #3 | EUR/USD Weekly and Parabolic SAR Pipruit: And could we use not three but two, or, say, four dashes against the previous trend? Commander in Pips: Sure, but this is the sphere of tuning work for the indicator. Again, as with others – if you like Parabolic SAR, you should experiment much to find the most useful tuning parameters for you on particular pairs and time frames, as rules that you will apply to trend shifting identification. Pipruit: And how it could be possible? Commander in Pips and Pipruit in chorus: And you should not rely just on a single indicator. Commander in Pips: Right, you’ve got my thought – the same as with all other indicators. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.