A parabolic stop is sort of like a moving average that starts when you put on a position. It uses an exponent so that it begins to accelerate in the direction of the trade after awhile.
In plain english, as long as momentum stays strong, Parabolics will keep you in the trade. After a few days, a retrace, or even just flat action, the stop will take you out.
It sounds real fancy but its not really.
Take a look at stockcharts or just do a google search. Some use it as a trading system by itself, but its too whippy for me to use like that. Great for stops, though, when you dont want to have to think about it too much.
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