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