Forex Academy Forex Basics Parabolic SAR | Parabolic SAR |
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This Technical Indicator is developed by Welles Wilder. This Parabolic SAR sets trailing price stops for long or short positions. Also referred to as the stop-and-reversal indicator, is more popular for setting stops than for establishing direction or trend. If the trend is up, you should buy when the indicator moves below the price. If the trend is down, you should sell when the indicator moves above the price. The letters SAR in Parabolic SAR stand for Stop And Reverse. Parabolic refers to the parabolic-shaped series of dotted lines that are calculated and overlayed on the underlying price curve. These lines serve as exit indicators, and can tell you where to set your trailing stops.
The SAR is calculated from previous data. In other words, information from the current period will determine what the SAR will be look like for the next period.
The idea is to always be in the market, constantly alternating between a long and short position. It is important to note that this indicator is extremely mechanical and will always assume that the trader is holding a long or short position. The ability for the parabolic SAR to respond to changing conditions removes all human emotion and allows the trader to be disciplined. |
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