Parabolic SAR Technical Analysis and Parabolic SAR MT5 Indicator

Developed by J. Welles Wilder and is used to set trailing price stops. This MT5 indicator was originally developed to analyze trending Markets. It's drawn as a chart overlay, that's on the price chart itself.

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

This MT5 indicator is drawn above or below the price - it's plotted as a series of dots. The length of movement of SAR Indicator will be determined by scale of currency movement.

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

This MT5 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 MT5 indicator provides excellent exit points. You should close long positions when the price falls below SAR and close short positions when price rises above it.

If you are long, the SAR indicator will move up every day, regardless of direction the currency is moving. The amount this MT5 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 price until the bearish down trend reverses.

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