Trend Indicator – Stop and Reverse System
Parabolic SAR was developed by J. Welles Wilder Jr. and is described in his book “New Concepts in Technical Trading Systems”.
The Parabolic Time / Price System is used to set trailing price stops and is referred to as the SAR (Stop-and –Reversal).
Parabolic SAR should only be employed in trending markets - when it provides excellent entry and exit points.
You should close long positions when the price falls below the SAR and close short positions when the price rises above the SAR.
If you are long (i.e., the price is above the SAR), the SAR will move up every day, regardless of the direction the price is moving. The amount the SAR moves up depends on the amount that prices move.
1. Go long when price meets the Parabolic SAR stop level, while short
2. Go short when price meets the Parabolic SAR stop level, while long
Sharechart Default: 6 period
The setting for the Parabolic SAR for the graph above was 60 periods. It can be modified: go to Settings > Indicators > Parabolic SAR.