Parabolic SAR Technical Analysis & Parabolic SAR MT5 Indicator

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

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

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

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

This MT5 indicator uses a parabolic calculation to plot the series of dots, This means that if the currency stops moving up with the same acceleration, the parabolic will continue with the same acceleration thus at some point the forex 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 price falls below SAR & close short positions when price rises above it.

If you are long, the SAR will move up every day, regardless of the direction the currency is moving. The amount this MT5 indicator moves up depends on amount that prices move.

The same theory will also apply to a Forex downward trend, the parabolic SAR will be above the forex price and it should remain above price until the bearish down forex trend reverses.

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