Trend Reversal

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🚨TREND REVERSALS 🚨

Let us look at “Stop & Reverse” as a Trend Reversal concept.

A Thread to Understand Parabolic Stop & Reverse (PSAR).

#trading #stockmarket

Parabolic SAR / PSAR / P SAR

PSAR is a Trend Reversal Indicator, with a feature to use the PSAR Value for Stop Loss Trailing which isn’t available with other Trend Reversal Indicators.

It is an Overlay Indicator seen as Dots as an Overlay on Chart either just below or above the price as below

If the trigger value is used as Entry Stop Loss, it may prove to be ‘safe’ from whipsaws in the early stages of entry before the trend matures.

If we may position the size, lower than your entry too.

The Values may prove as Stop Loss to not only Exit but re-enter too the reverse position. 

Thus, it is a Stop to Reverse than just Stop to Get-Out or Exit a trade.Set-Up

Current SAR = Prior SAR + Prior AF(Prior EP – Prior SAR)

Read more:

https://school.stockcharts.com/doku.php?id=technical_indicators:parabolic_sar

Acceleration Factor (AF)

The Acceleration Factor is multiplied by the difference between the Extreme Price (EP) of the current trend and the prior period’s SAR.

Trading View Setup Inputs as below

Acceleration Factor or Increment or Step is a factor to increase SAR values moving SAR closer to Price.

A Lower Increment like 0.005 will slow the rate of increase in SAR Values and keep SAR at a safe distance.

A Higher Increment like 0.01 will speed the rate of increase in SAR  and may take it much closer to Price and reverse too often.

Under Increment 0:005
Steps   Time   Price
0.005  13.40 2441
0.010  14:28  2446
0.015  14:25  2446

(Charts below for study)

Conclusion:

Step 0.005 was the earliest in price & time to trigger

Chart for:

Under Increment 0.005 Step 0.005 

Trigger at 13.40 2441

Step 0.005 was the earliest in price and time to trigger

Chart for:

Under Increment 0:005 Step 0.015 

Trigger 14:28 2446

Chart for:

Under Increment 0:005 Step 0.015 

Trigger 14:25 2446

Let us increase the Increment to 0.01

Under Increment 0.01:

Steps  Time   Price
0.01    14:28  2446
0.02    14:21  2445
Steps did not matter much.

Here below are the two charts as evidence

0.001 14:23 2446

Under Increment 0.02 14:21 2445

Thus, Under Increment 0.01 increasing steps to 0.01 and 0.02 did not matter much in terms of time and price  And move to focus on:

Increment 0.005 and Step 0.005 on different time frames.

Under Increment 0.005 and Step 0.005 1min

Under Increment 0.005 Step 0.005

Observations

1min 13:40 17Mar 2441
3min 14:00 17Mar 2441
5min 14:55 16Mar 2402 -2%
15min 09:45 16Mar 2397 -2%
30min 14:45 16Mar 2401 -2%
1-Hour 13:15 9Mar 2341 -4%
-% is an advantage with a lower price

Charts follow

1min 13:40 17Mar 2441

Under 3min 14:00 17Mar 2441

Under 15min 09:45 16Mar 2397 -2%

Under 30min 14:45 16Mar 2401 -2%

Under 1-Hour 13:15 9Mar 2341 +4%

Thus we can conclude:

🔹5min for intraday
🔹15/30 min for BTST
🔹1Hour for Swing/Positional

How to Use Time Frames?

You can start with 1,5,15 or 30min too.

But for now, let us start with 1min.

If you operate on 1min, then Enter at first Buy Trigger.

When the Sell is Triggered on 1min, once check if the next HTF 5min is in Sell. 

If in Sell too, then Exit Buy anyway.

But if 5min is Buy thereafter your operating time frame is 5min and continue in Buy.

Now if 5min TF triggers Sell, check once if the next HTF 15min is in Sell. If 15min is in Sell too, then Exit Buy on anyway.

But if 15min is Buy thereafter your operating time frame is 15min and continue in Buy And so on.

Rule: Whenever on LTF & HTF both trigger the same Sell, Exit anyway.

That’s How one can switch-n-use Time Frames!

Thank you for reading

If you like what you read, do maximize the reach.

You can also read the entire thread on the blog:

https://nimblrschool.com/blog/trendreversal-psar