Parabolic SAR MetaTrader 4 Technical Indicator and Parabolic SAR Signals

Created by J. Welles Wilder and is used to set trailing price stops. This indicator was originally developed to analyze trending Markets. It is drawn as a chart overlay, that is on the price chart itself.

This is a very accurate indicator for providing exit points & thus it's used to set trailing stops and is usually referred to as the 'SAR' (stop and reversal).

This indicator is plotted above or below the price - it is plotted as a series of dots. The length of movement of SAR Indicator will be determined by scale of currency movement.

In an upwards trend the parabolic SAR Indicator will be below the price. As long as the uptrend continues then the SAR will continue being below price. When price move down and parabolic SAR goes above price then the market trend reverses to bearish.

This indicator uses a parabolic calculation to draw the series of dots, This means that if the currency stops moving up with the same acceleration, the parabolic SAR Indicator will continue with same acceleration thus at some point the price will hit the indicator if it slows down too much.

Explanation

This indicator provides excellent exit points. You should close long positions when the price falls below SAR and close short positions when the price rises above it.

If you're long, the SAR indicator will move up every day, regardless of direction the currency is moving. The amount this trading indicator moves up depends on amount that prices move.

The same theory also will apply to a downwards trend, the parabolic SAR will be above the price & it should remain above the price til the bearish downtrend reverses.

The chart below shows an example of the Parabolic SAR in an uptrend market, You can see how it trailed below price(Bullish Market) until when it was hit and the trend reversed.