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Parabolic weighted moving average is an indicator designed to determine the current market trend. The indicator is based on moving averages. However, one of the most important differences between Parabolic weighted moving average and other indicators, which are also based on moving averages, is the absence of lagging signals.
The indicator is installed in the lower window of the price chart, representing a curved line, which, depending on the current trend, acquires a certain color. Parabolic WMA is used on any timeframe, with any currency pairs.
Input parameters
Despite the vastness of the work performed, the Parabolic WMA indicator has only three input parameters that will make up the main work of the indicator. Thanks to a small number of parameters, even a beginner can handle the indicator optimization.
- -Period - value of the period of the curved line of the indicator. The default value is 27.
- -Power-parameter of the curve reaction to the price level change. The default value is 2.
- -Price-type of the price to which the indicator calculations will be applied. By default, it has the Median price value.
Indicator signals
The signals of the Parabolic WMA indicator are very accurate due to careful filtering. Therefore, a certain position can be opened immediately after the signal arrives. The indicator line has two colors and, accordingly, the line color change will be the indicator signal.
Signal for Buy trades:
- -In the market, by changing the color of the curved line of the indicator, an uptrend was determined.
If there is an uptrend, a long position can be opened on the candle where the color of the curve changed. The trade should be closed when the line color changes.
Signal for Sell trades:
- -Change in the color of the line, characterized by the presence of a downtrend in the market.
After identifying a downtrend, a short position can be opened on the candle where the color of the curve changed. The trade should be closed when the color of the curve changes.
Conclusion
Parabolic weighted moving average is a great helper for determining the trend. The indicator is good for interacting with other indicators, in combination with which a great strategy is created. Despite the ease of use of the indicator, it is recommended to use a demo account beforehand.
