Parabolic SAR
Parabolic SAR Technical Indicator
Section titled “Parabolic SAR Technical Indicator”The Parabolic SAR Technical Indicator was developed for analyzing trending markets. It is similar to the Moving Average Technical Indicator, but with higher acceleration and the ability to change position in terms of price. In a bull market, the indicator is below the prices, and in a bear market, it is above the prices.
Indicator Turn and Signal Lines
Section titled “Indicator Turn and Signal Lines”When the price crosses the Parabolic SAR lines, the indicator turns and its values move to the other side of the price. This turn indicates the end of a trend or a potential correction stage. The starting point for the indicator is the maximum or minimum price of the previous period.
Exit Points and Trailing Stop
Section titled “Exit Points and Trailing Stop”The Parabolic SAR is useful for determining exit points. Long positions should be closed when the price falls below the SAR line, and short positions should be closed when the price rises above the SAR line. The indicator can also be used as a trailing stop line.
Price Movement and Indicator Value
Section titled “Price Movement and Indicator Value”If a long position is open (price above the SAR line), the SAR line will move up regardless of the price direction. The movement of the SAR line depends on the scale of the price movement. The indicator value increases when the current price is higher than the previous bullish price, and vice versa. The acceleration factor also doubles at the same time, causing the indicator and price to come closer together.