10.04.2023

Parabolic Stop and Reverse (PSAR) how to use it for making decisions in the market

PSAR (Parabolic Stop and Reverse) is a technical indicator that is used to determine entry and exit points in the market. How PSAR is calculated and how it can be used in technical analysis to make decisions in the market.

PSAR stock indicator - what is it, who came up with how it is calculated, what it shows

The PSAR (Parabolic Stop and Reverse) stock indicator is a technical indicator that is used to determine the direction of the trend in the market and the points of entry and exit from the market. This indicator was developed by Joseph Granville in 1976.

The PSAR is calculated based on the price and the direction of price movement. The indicator is displayed as dots on the price chart and moves depending on the trend direction.

How is PSAR considered?To calculate the points of the PSAR indicator, a formula is used that takes into account the previous values of the price and the indicator points.

In addition, to calculate the indicator, it is necessary to set initial parameters, such as step and maximum value.

The step is the value by which the PSAR point changes when the trend direction changes. For example, if the step is 0.02 and the current PSAR point is above the price, then the next PSAR point will be 0.02 away from the previous PSAR point. If the trend direction does not change, then the step remains unchanged.

The maximum value is the maximum value by which the PSAR point can change when the trend direction changes. For example, if the maximum value is 0.2 and the step is 0.02, then the PSAR point will not move further when its current value is 0.2 from the previous PSAR point.

The PSAR indicator can be customized for a specific instrument and timeframe. The smaller the timeframe, the more sensitive the indicator will be to price changes. In addition, the PSAR indicator can be configured to take into account individual trading strategies to ensure maximum efficiency in trading.

How is it used?The values of the PSAR indicator on the chart are displayed as points that can be both above and below the price, depending on the current trend direction.

If the points are below the price, it may indicate the presence of an uptrend, and if the points are above the price, it may indicate the presence of a downtrend.

In addition, the values of the PSAR indicator can also help determine the entry and exit points of the market. If the indicator points are below the price, it may indicate the possibility of buying, and if the points are above the price, it may indicate the possibility of selling. At the same time, when the points of the PSAR indicator intersect with the price, it is possible to change the direction of the trend.

Several methods can be used to analyze the values of the PSAR indicator. For example, you can compare PSAR values with the current price and other indicators to determine the current market situation and opportunities to enter or exit a position. In addition, you can analyze the movement of the PSAR indicator points over time to determine the speed and direction of the trend.

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