The upward trend of the extremum point is the highest price recorded in the trend. On a downtrend this point is the minimum fixed price. As soon as the indicator of the parabolic SAR system signals a trend reversal, the algorithm for calculating the extremum is reversed. When there is such a signal, the acceleration factor is reset to its initial value for which in practice often used value of 0.02, ie 2%. When the closing price of the current trading period, on an uptrend exceeded last committed point extremum, this ratio increased by 2%, and the value of extremum updated. EUR/JPY The same increase in acceleration factor and update the extremum occurs if the closing price of the current trading period is less than the extreme point on a downtrend. The indicator is calculated ahead, ie of the current day are used in calculating the indicator values of tomorrow.
Mathematical formula to calculate the indicator of the parabolic SAR system is recursive and is the following:
SAR (n +1) = SAR (n) + AF * (EP - SAR (n)),
where SAR (n +1) - the value indicator of tomorrow, SAR (n) - the indicator value of the current day, AF - the acceleration factor and the EP - the latter fixed point of extreme. In addition, in the process of calculating the indicator are used few additional conditions:
• if the indicator’s value of tomorrow SAR (n +1) lies within or outside the price range of today (n) or yesterday (n-1) of the trading day, then its value is set on a lower limit of this range. Related blogpost How to Trade on News Forex Reviews?.For example, if in an uptrend, the indicator’s value is greater than the minimum price fixed for the past two days, including today, the indicator takes the value of the fixed minimum prices, for the downward trend of the converse is true;
• if the indicator value tomorrow SAR (n +1) lies within or outside the price range tomorrow, is a signal of a trend reversal, and an algorithm for calculating the indicator should switch the "phase".
As soon as there is a change of trend, ie switching "phase" of the algorithm,Add me to friends currency investment. the indicator’s value on Forex markets of the parabolic SAR system for the new trend is set to the last committed point of extreme EP of the old trend. Itself an extreme point in this case is set to point the maxim, if a new trend - the rising and the minimum point, if the new trend - downward. Acceleration factor AF is reset to its initial value of 2%.
Indicator of the parabolic SAR system can be used as a stop-loss signal in the bidding process on Forex markets buy foreign currency online. The value of technical indicator is always lagging behind prices, so at the time of entry can be safely set stop-loss in the current value of the indicator. But first make sure that such an approach does not violate your money management strategy in trading on Forex markets.
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