Parabolic SAR Technical Analysis and Parabolic SAR Signals
Created by J. Welles Wilder.
The Parabolic SAR is used to set trailing price stops. This indicator is usually referred to as the "SAR" (stop-and-reversal) & it is used to follow price action closely.
- In an Uptrend, the stop & reversal will trail below the market price
- In a downtrend, the stop and reversal will trail above the market price
Technical Analysis and How to Generate Signals
This indicator provides excellent exit points.
Exit Trading Signal for Buy trade transactions
Traders should close long trade positions when the price falls below the indicator.
If you're trading long i.e. The price is above the stop & reversal, the SAR will move up each day, regardless of direction that price action is moving. The movement of the indicator depends on the number of pips that the prices move. When the SAR changes the direction then the market trend also changes into downwards. This generates the exit signal for long trade transactions.
Exit Signal for Sell trades
Traders should close short trade positions when the price rises above the indicator.
If you're trading short i.e. The price is below the stop & reversal, the SAR will move down every day, regardless of direction that price action is moving. The movement of the indicator depends on the number of pips that the prices move. When the SAR changes the direction then the market trend also changes into up. This generates the exit signal for short trades.
Exit Trading Signal for Buy and Sell trades
