Technical Trading Tips and Techniques by 
Just some quick notes on the the Parabolic Stop-And-Reverse (SAR) indicator created by J. Welles Wilder. It is one of my favorite indicators because it stresses solid stop-loss management, and it provides logical placement of trailing stop and reversal points. Trailing stops are extremely useful elements of an overall risk management strategy.
The Parabolic SAR dots follow price such that if a dot is below the price bar, the trade should be long with a dynamic stop-loss at the dot. Conversely, if the dot is above the price bar, the trade should be short with a dynamic stop-loss at the dot.
The biggest problem with this indicator, though, is that like many other indicators, the Parabolic SAR can be prone to vicious whipsaws where the trading signals result in a string of losses due to lack of trend. But the fact that this indicator stresses a logical use of the trailing stop-loss functionality makes it a valuable tool for me.
- James
James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading