Sunday, June 30, 2013

Using Parabolic SAR to exit trades

You can also use Parabolic SAR to help you determine whether you should close your trade or not.
When EUR/USD started sliding down in late April, it seemed like it would just keep droppin' like it's hot. A trader who was able to short this pair has probably wondered how low it can go.
In early June, three dots formed at the bottom of the price, suggesting that the downtrend was over and that it was time to exit those shorts.
If you stubbornly decided to hold on to that trade thinking that EUR/USD would resume its drop, you would've probably erased all those winnings since the pair eventually climbed back near 1.3500.