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The Triple Parabolic Trading Technique
Can We Apply a Triple Parabolic on the Market Price?
Sofien Kaabar, CFA5 min read·Just now--
This article presents a simple technique to detect the on-going trend using a triple PSAR confirmation tool. It allows you to confirm the current trend and have more convictions in your ideas.
The Parabolic SAR in a Nutshell
The parabolic SAR was introduced by J. Welles Wilder Jr. in 1978, alongside other iconic indicators like the RSI. SAR stands for “Stop and Reverse.” It is primarily designed as a trend-following indicator that also acts as a trailing stop mechanism. Its dual nature makes it a favorite among systematic traders and algorithm designers.
The intuition is simple: in a rising market, price tends to move upwards in a curved, parabolic trajectory. The same is true in reverse for downtrends. Wilder believed that if one could model a price parabola that hugged the trend, tightening as the trend matured, then one could capture the trend’s strength while maintaining protective stop levels.
In essence, the parabolic SAR doesn’t just aim to follow price; it locks in profits as trends mature, and flips direction when a reversal is statistically likely, hence the “stop and reverse” feature. We’ll break the formula into logical steps, assuming the indicator is being…
