Start your trial today and enjoy 30 days full access

    Parabolic SAR How-To Guide

    Parabolic SAR

    The Parabolic SAR (Stop and Reverse) is a popular technical indicator used to identify potential trend reversals in a market. It is displayed as a series of dots placed either above or below price candles on a chart. Here's how to effectively use the Parabolic SAR indicator:

  • Understanding the Indicator:
  • The Parabolic SAR dots appear below price candles during uptrends, indicating a bullish signal.
  • The dots appear above price candles during downtrends, indicating a bearish signal.
  • The indicator's positioning relative to price provides insights into potential trend reversals.
  • Interpreting the Signals:
  • Bullish Signal: When the Parabolic SAR dots switch from being above to below price candles, it indicates a potential reversal from a downtrend to an uptrend. This may be a buying opportunity.
  • Bearish Signal: When the Parabolic SAR dots switch from being below to above price candles, it indicates a potential reversal from an uptrend to a downtrend. This may be a selling opportunity.
  • Setting Stop-Loss Levels:
  • The Parabolic SAR can also be used to set trailing stop-loss levels. During an uptrend, place stop-loss orders below the Parabolic SAR dots. During a downtrend, place stop-loss orders above the Parabolic SAR dots. This technique helps protect profits and limit losses as the trend develops.
  • Best Uses and Tips:
  • Trend Confirmation: The Parabolic SAR can help confirm the direction of the trend and identify potential trend reversals.
  • Adjusting Sensitivity: Experiment with different settings to adjust the sensitivity of the Parabolic SAR based on the timeframe and volatility of the market you are trading.