Trading With Parabolic SAR

What is Parabolic SAR?

Parabolic SAR (Stop And Reversal) is a method devised by J. Welles Wilder, to find trends in market prices or securities. It was designed to help you anticipate trend reservals. You will see a series of dots marking a channel through which prices are currently moving. If prices go above or below these points, it can mean that there will be a potential reversals in price movement in near future.

How does it work?

Trading with Parabolic SAR involves the following signals:

• • SAR dot is above the price - downtrend.

  • SAR dot is below the price - uptrend.

Parabolic SAR indicator is a trend indicator, it tells traders about price stop-and-reverse points as well as trend direction. Its concept of usage is easy to understand from the first look. When price is above Parabolic SAR dots, traders should be holding long positions only. Once Parabolic SAR dots come on top of the price - it is time to change trading positions to short.

How to use Parabolic SAR?

The Parabolic SAR system should be used only when the market has the defined trend. When the trend is absent this system generates a lot of incorrect signals.

Using Parabolic SAR to exit trades: traders can also use Parabolic SAR to determine whether they should close their trade (their trend is ending) or not.