Forex Parabolic Stop and Reverse EA Setup - Setting Up Parabolic SAR EA

Forex Parabolic Stop and Reverse EA Setup - Setting Up Parabolic Stop and Reverse EA - A trader can come up with an Parabolic Stop and Reverse EA based on the Parabolic Stop and Reverse indicator explained below.

Forex Parabolic Stop and Reverse EA rules can be combined with other Forex technical indicators to come up with other Expert Advisor Forex Robots that trade using rules based on two or more indicators combined to form a trading system.

Parabolic SAR Forex Trading Analysis and Parabolic SAR Signals

Developed by J. Welles Wilder & is used to set trailing price stops. This indicator was originally developed to analyze trending Forex Markets. It is drawn as a chart overlay, that is on the price chart itself.

This is a very accurate indicator for providing exit points & thus it is used to set trailing stops & is usually referred to as the 'SAR' (stop-and-reversal).

This indicator is plotted above or below the price - it is plotted as a series of dots. The length of movement of the SAR will be determined by the scale of the currency movement.

In an upward Forex trend the parabolic SAR will be below the price. As long as the uptrend continues then the SAR will continue being below the price. When price move down and the parabolic SAR goes above the price then the Forex trend reverses to bearish.

This indicator uses a parabolic calculation to plot the series of dots, This means that if the currency stops moving up with the same acceleration, the parabolic will continue with the same acceleration thus at some point the price will hit the technical indicator if it slows down too much.

Explanation

This indicator provides excellent exit points. You should close long positions when the price falls below SAR and close short positions when the price rises above it.

If you are long, the SAR will move up every day, regardless of the direction the currency is moving. The amount this indicator moves up depends on the amount that prices move.

The same theory will also apply to a Forex downward trend, the parabolic SAR will be above the price and it should remain above the price until the bearish downtrend reverses.

The chart below shows an example of the Parabolic SAR in an uptrend market, You can see how it trailed below the price(Bullish Forex Market) until when it was hit and the Forex trend reversed.

Forex Parabolic Stop and Reverse EA Setup