The Parabolic Time/Price indicator derives its name from the fact that it resembles a parabola when charted. The purpose of the Parabolic is to allow room for movement during the initial stages of a trade, but close in with progressively tighter stop-loss points as the trade develops.

Once a Parabolic SAR is reached, the current position is liquidated and a new position in the opposite direction is taken. Therefore, the Parabolic Time/Price indicator always has you in the market.

Additional Analysis:

Early indications of an optimal exit point can sometimes be interpreted by watching the rate of change of the difference between the market and the parabolic. Often, 2 to 3 consecutive bars with a declining distance between price and the parabolic indicates a sufficient weakening in the current trend to close a position before the parabolic is actually reached.

Wilder Jr., Welles. New Concepts in Technical Trading Systems. Trend Research. McLeansville, NC. 1978.