The
parabolic oscillator represents the difference between the prices and the
parabolic. When the market is trendy, the prices run away from parabolic
(impulsion phase) and the oscillator reaches the trades threshold.
When the trend is over, the parabolic gos near the prices and its oscillator
moves back to threshold.
The parabolic
oscillator method uses these thresholds in order to de trade.
The trading
signals are :
- oscillator jumps over bull threshold : buying,
- oscillator reaches back bull threshold : close long position,
- oscillator plunges under bear threshold : short-selling,
- oscillator reaches back bearl threshold : close short position.
Trading
Example (FA=0.02, MaxFA=0.2, Threshold = 3.1)