Using Well Wilder’s Parabolic to Trade Trends
With 30 years of experience in stocks and commodities, I have used many methods to trade. My method for trading centers around the Welles Wilder Parabolic. The Parabolic has given me foundation. It is my confirmation tool. In addition to putting on new positions, the Parabolic has assisted me in avoiding negative trades. The Parabolic is my center of concentration.
The Welles Wilder Parabolic is a valuable tool in trading today’s markets. The system is complex in computation but user friendly to the average person. Unlike most analysis, either technical or fundamental, the Parabolic is always long or short. There is no neutral. After a position is set, the Parabolic clearly defines where the reversal point exists.
The Parabolic is also referred to as SAR-Stop and Reverse. By definition, the system always carries a stop at where the reversal in position takes place. The placement of the stop is a function of both Time and Price. If you are long, the reversal will continuously move up as a function of time. If you are short, the reversal will continuously move down as a function of time. Time will move the reversal regardless of the direction in Price. The reversal does use Price in looking for history of most favorable spots. The reversal point will move gradually at first but then accelerate with Time.
An example of a long is April Gold. The Parabolic went long on 1/23/09 @ $850. The reversal is $727.10. That number will move up every week.
An example of a short is Caterpillar. The Parabolic went short on 9/26/08 @ 64.13.
The Parabolic can prove to be a major asset in today’s markets. Clearly, there is value in going long or short. In addition, because of the vast amount of information and analysis, the Parabolic can prove to be valuable in confirmation. Many times the temptation is immense to go long but one will think twice if the Parabolic is short. The real beauty is the Parabolic is always long or short with a precise reversal, extremely user friendly.
Steve Weitz has been trading stocks and commodities for over 30 years. He graduated from Berkeley with an accounting degree in 1976 and have worked for Smith Barney, Oppenheimer, Merrill Lynch, E.F. Hutton, Shearson Lehman, and Paine Webber. He is currently an independent stock broker with a California broker dealer and an introducing broker trading commodities. To Learn more visit www.altinvestmentsfortheweek.com or www.commoditiesfortheweek.com.