In our last lesson we learned about the Average Directional Index (ADX) an indicator which helps traders determine the strength of trends in the market. In today’s lesson we are going to look at another indicator called the Parabolic Stop and Reversal (Parabolic SAR), which helps traders enter and manage positions when trading those trends.

The Parabolic SAR is an indicator that, like Bollinger bands is plotted on price, the general idea of which is to buy into up trends when the indicator is below price, and sell into downtrends when the indicator is above price. Once traders are in positions the indicator also assists in managing the position by providing guidance as to how one should trail their stop.

Example of the Parabolic SAR

While this is an indicator that works very well in trending markets, as you can see from the below chart simply following the basic be long when the indicator is below price and be short when the indicator is above price will lead to many whipsaws in range bound markets.

Example of Whipsaws in Range Bound Markets

To combat this problem the developer of the indicator J. Welles Wilder (who also developed the RSI and ADX) recommended establishing the strength and direction of the trend first through the use of things such as the ADX, and then using the Parabolic SAR to trade that trend. As mentioned above although the Parabolic SAR is used for both entering and managing positions, it is used far more to set stops once in a position.

As with the other indicators we have covered in past lessons it is recommended to use this indicator in conjunction with other methods of analysis for confirmation not only on trade entry but also on trade exit.

Example:

That’s our lesson for today. While my lessons are by no means exhaustive on the subject this also concludes my series on technical indicators. If you are interested in learning more about the indicators that we have studies as well as some of the other indicators that traders use, I encourage you to visit the technical indicators section of informedtrades.com. In our next lesson we will finish up our series on technical analysis by taking a deeper look at candlestick chart patterns and how one can use these in their trading.

As always I encourage you to participate in the community by posting your comments and questions below, and have a great day!

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Trading System – DartThrow Trader Insider Program – Part 2

Former seminar instructor Jimmy Slagle has had enough. After nearly two decades of traveling around the United States teaching hundreds of stock trading seminars in hotel ballrooms, he was tired of seeing otherwise willing students walk away from his events empty-handed, unable to afford the $30,000 price tag to take the “next step” in the continuing education process. But as an employee of the seminar company himself, Slagle was powerless to negotiate the price of the classes for less.

“It’s incredibly discouraging to have this knowledge in my head, and to have my hands tied, metaphorically speaking,” says Slagle, reflecting on his years working as a top sales speaker in a major educational seminar company. “I wasn’t in a position to negotiate offers with students, no matter how badly I wanted to at the time. I made a promise to myself that as soon as I could, I’d find a way to bring my knowledge and experience as well as the knowledge and experience of others to as many people as possible, through an innovative and comprehensive trading system, at an investment that the average consumer could easily afford.”

Two years later, Slagle made good on his promise, in a rather unorthodox way.

Borne out of an attempt to make an illustrative point with a belligerent student at one of his seminars, Slagle created a unique trading system he tagged The DartThrow Trader Insider Program, a trading system that would teach students specific skills quickly and effectively, for a fraction of the price of the large seminar companies. However, instead of relying on the latest stock guru, technical system, or stock-predicting “black box” to decide which stocks to trade each week, Slagle thumbs his nose at conventional wisdom and turns to his trusty dartboard instead.

“It’s a common misconception that in order to be successful in the financial markets, you have to be ‘right’ in your predictions one hundred percent of the time,” Slagle explains. “I simply pointed out that, if you know what you’re doing, you can put stock quotes on a wall, throw a dart, randomly select stocks and still make money. It got a big laugh from the crowd at the time, but that’s really where the idea started.”

From that simple exchange, the former seminar speaker embarked on a two-year project to prove that, indeed, within certain parameters, such as a willingness to learn, study, and focus, one can actually throw darts at a specially-made “Stock Quote Dart Board” of over 400 different eligible stocks and successfully make an impressive profit using his innovative trading system.

“I knew my theory was correct, but even I was surprised by the impressive returns we made that first year,” Slagle laughs. But he proved it wasn’t a fluke. “Any good trading system has to be a consistent, repeatable process to be worth anything at all. We have a few weeks left of this year, but let’s just say it’s turning out to be just as successful as last year.”

If you are ready to see the results and participate in what others have already called “the most innovative and outrageously creative financial education program every attempted by mortal man”, I’d like to invite you to visit dartthrowtrader.com and take part in our unique multi-media training program.

Trading System, Trading Course, Trading Education, Trading Strategy, Trading systems, Investment Strategy, How To Trade, Investment Strategies, Jimmy Slagle, DartThrow Trader

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