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PARABOLIC SAR
What Is the Parabolic SAR Indicator?
The parabolic SAR indicator, developed by J. Wells Wilder, is used by traders to determine trend direction and potential reversals in price. The indicator uses a trailing stop and reverse method called "SAR," or stop and reverse, to identify suitable exit and entry points. Traders also refer to the indicator as to the parabolic stop and reverse, parabolic SAR, or PSAR.
The parabolic SAR indicator appears on a chart as a series of dots, either above or below an asset's price, depending on the direction the price is moving. A dot is placed below the price when it is trending upward, and above the price when it is trending downward
What Does the Parabolic SAR Indicator Tell You?
The parabolic indicator generates buy or sell signals when the position of the dots moves from one side of the asset's price to the other. For example, a buy signal occurs when the dots move from above the price to below the price, while a sell signal occurs when the dots move from below the price to above the price.
Traders also use the PSAR dots to set trailing stop loss orders. For example, if the price is rising, and the PSAR is also rising, the PSAR can be used as a possible exit if long. If the price drops below the PSAR, exit the long trade.