Parabolic SAR Analysis & Parabolic SAR Trading Signals

Created by J. Welles Wilder.

The Parabolic SAR is used to set trailing price stops. This indicator is usually referred to as the "SAR" (stop-and-reversal) and it is used to follow price action closely.

• In an Uptrend, the stop and reversal will trail below the market trading price
• In a downward trend, the stop and reversal will trail above the market price

Trading Analysis & Generating Trading Signals

This technical indicator provides excellent exit points.

Exit Trading Signal for Buy trade transactions

Traders should close long trades when the price falls below the indicator.

If you are trading long i.e. The trading price is above the stop and reversal, the SAR indicator will move up every day, regardless of the direction that price action is moving. The movement of the indicator depends on the number of pips that the prices move. When the Parabolic SAR indicator changes the direction then the market trend also changes to down. This generates the exit signal for long trade transactions.

Exit Trade Signal for Sell trade transactions

Traders should close short trades when the price rises above the indicator.

If you are trading short i.e. The trading price is below the stop and reversal, the SAR will move down every day, regardless of the direction that price action is moving. The movement of the indicator depends on the number of pips that the prices move. When the Parabolic SAR indicator changes the direction then the market trend also changes to up. This generates the exit signal for short trade transactions.

Exit Signal for Buy and Sell trades