The Parabolic SAR is a technical indicator developed by J. Welles Wilder to determine the direction that an asset is moving. The indicator is also referred to as a stop and reverse system, which is abbreviated as SAR. It aims to identify potential reversals in the price movement of traded assets. It can also be used to provide entry and exit points.
The Parabolic SAR mainly works in trending markets. Wilder recommends traders should first establish the direction of the trend using the parabolic SAR and then use alternative indicators to measure the strength of the trend.
When graphically plotted on a chart, the Parabolic SAR indicator is displayed as a series of dots. If it appears below the current price, the parabolic SAR is interpreted as a bullish signal. When it is positioned above the current price, it is deemed to be a bearish signal. The signals are used to set stop losses and profit targets.
How Parabolic SAR works
The Parabolic SAR is usually represented in the chart of an asset as a set of dots that are placed near the price bars. Generally, when these dots are located above the price, it signals a downward trend and it is deemed to be a sell signal. When the dots move below the price, it shows that the trend of the asset is upward and signals a buy.
The change in the direction of the dots produces trade signals which can produce a profit when the price makes big swings.
When the price of a security rises, the dots also rise. The pace accelerates with the trend. The Parabolic SAR works well for capturing profits by entering the trade during a trend in a steady market.
It may produce false signals when the price moves sideways, and the trader should expect small losses or small profits. The indicator can also be used used to set stop loss orders. This can be achieved by moving the stop loss to match the level of the SAR indicator.
Download a customized parabolic sar system (http://bit.ly/2K02Hi4) with fractals.
The Parabolic SAR mainly works in trending markets. Wilder recommends traders should first establish the direction of the trend using the parabolic SAR and then use alternative indicators to measure the strength of the trend.
When graphically plotted on a chart, the Parabolic SAR indicator is displayed as a series of dots. If it appears below the current price, the parabolic SAR is interpreted as a bullish signal. When it is positioned above the current price, it is deemed to be a bearish signal. The signals are used to set stop losses and profit targets.
How Parabolic SAR works
The Parabolic SAR is usually represented in the chart of an asset as a set of dots that are placed near the price bars. Generally, when these dots are located above the price, it signals a downward trend and it is deemed to be a sell signal. When the dots move below the price, it shows that the trend of the asset is upward and signals a buy.
The change in the direction of the dots produces trade signals which can produce a profit when the price makes big swings.
When the price of a security rises, the dots also rise. The pace accelerates with the trend. The Parabolic SAR works well for capturing profits by entering the trade during a trend in a steady market.
It may produce false signals when the price moves sideways, and the trader should expect small losses or small profits. The indicator can also be used used to set stop loss orders. This can be achieved by moving the stop loss to match the level of the SAR indicator.
Download a customized parabolic sar system (http://bit.ly/2K02Hi4) with fractals.
Attached Image (click to enlarge)
