The Parabolic Sar is misleading because it doesn't report the "No Trend" Market... Or does it?

adenauer692  
Hello everyone, I am studying the Parabolic Sar in depth and none of the internet tutorials I have found talk about how the Psar reports Sideways Market situations (ie "no trend").

It is as if for this indicator the market was either only bullish or only bearish. And as we all know that is not a good interpretation of what really happens.

So, the question is: Does the Parabolic Sar really suffer this informative "amputation" or is there a way for this indicator to also report "No Trend" Market situations?

Thanks!
Fernando Carreiro  
adenauer692: Hello everyone, I am studying the Parabolic Sar in depth and none of the internet tutorials I have found talk about how the Psar reports Sideways Market situations (ie "no trend"). It is as if for this indicator the market was either only bullish or only bearish. And as we all know that is not a good interpretation of what really happens. So, the question is: Does the Parabolic Sar really suffer this informative "amputation" or is there a way for this indicator to also report "No Trend" Market situations? Thanks!
The Parabolic SAR was never intended to be used to identify a trend or "no-trend". It was created to identify potential reversals.
adenauer692  
Thank you Fernando, you are always very precise and I appreciate it...

So, I guess since the PSAR was invented by J.Welles Wilder in June 1978 at the same time as the ADX (which does report the side market), Wilder must have decided "not to provide redundant information" with the PSAR.
Fernando Carreiro  
adenauer692 #: Thank you Fernando, you are always very precise and I appreciate it... So, I guess since the PSAR was invented by J.Welles Wilder in June 1978 at the same time as the ADX (which does report the side market), Wilder must have decided "not to provide redundant information" with the PSAR.
I might help by reading his book — New Concepts in Technical Trading Systems (John Welles Wilder Jr) [1978, Trend Research]
adenauer692  
Fernando Carreiro #:
The Parabolic SAR was never intended to be used to identify a trend or "no-trend". It was created to identify potential reversals.

In any case, it is very striking that the "Parabolic Sar" is listed among the Trend indicators in Metatrader 5.

And this, we must admit, is very confusing, right?:

MT5_Tendencias_Parabolic_Sar

Fernando Carreiro  
adenauer692 #: In any case, it is very striking that the "Parabolic Sar" is listed among the Trend indicators in Metatrader 5. And this, we must admit, is very confusing, right?:


It is classified as a trend following indicator because it helps identify reversals of a trend.

In the same way as the Standard Deviation indicator is also classified as a trend following indicator, yet cannot truly identify one either.

Fernando Carreiro  
adenauer692 #: Thanks, but I think that the sieve of time has been shedding "the best nuggets in the book" and those nuggets can be found on the internet if you know how to actively search for them.

Then you are losing out quite a bit!

adenauer692  
Fernando Carreiro #:

Then you are losing out quite a bit!

It is very probable. I put it on my to-read list.

Fernando, can you give an example of knowledge (genuine, exclusive to the book) that encourages its reading?

Fernando Carreiro  
adenauer692 #: It is very probable. I put it on my to-read list. Fernando, can you give an example of knowledge (genuine, exclusive to the book) that encourages its reading?

That is difficult to say, because its importance depends on one's opinion and mindset at the time. What I can say is this ...

The book was written during a time when computers were just slightly better than a desk calculator, so everything was still done on graph paper with manual calculations. So, great effort is put into keeping it simple and making the calculations incremental so as to be quick an easy. Modern versions of the some of his indicators have become less efficient and more convoluted compared to the originals, and they have lost some of the original intention.

Following along the book using graph paper and hand calculated tables also makes one properly think and consider the analysis. If one were to ignore this and just plug the data into a spreadsheet and look at the final results, one losses out quite a lot in understanding the basic concepts.

In other words, the book is only as good as the effort you put into it, and if you are looking for short-cuts and quick fixes, then this book is not for you.

adenauer692  
Fernando Carreiro #:

That is difficult to say, because its importance depends on one's opinion and mindset at the time. What I can say is this ...

The book was written during a time when computers were just slightly better than a desk calculator, so everything was still done on graph paper with manual calculations. So, great effort is put into keeping it simple and making the calculations incremental so as to be quick an easy. Modern versions of the some of his indicators have become less efficient and more convoluted compared to the originals, and they have lost some of the original intention.

Following along the book using graph paper and hand calculated tables also makes one properly think and consider the analysis. If one were to ignore this and just plug the data into a spreadsheet and look at the final results, one losses out quite a lot in understanding the basic concepts.

In other words, the book is only as good as the effort you put into it, and if you are looking for short-cuts and quick fixes, then this book is not for you.

Thanks Fernando, this thread is getting more and more interesting!

Are you telling me that any of the following indicators have undergone changes compared to their original version?

Indicadore de Welles

*The MACD is also listed, although it looks smaller.

Please, tell us the example that in your opinion is the most "scandalous" and what are we tarders "missing" when trading with this more modern but "significantly different" indicator?

That is, what negative consequences does it have for traders to use that modified indicator compared to the original one.