Introduction to the Parabolic SAR

parabolic indicator vs sar

This chart of Natural Gas Futures shows four location where a buy signal would have been offered as a trading opportunity. There are 3 settings for the Parabolic Sar that you can customize although some platforms parabolic indicator vs sar like Metatrader may only have 2. Each time if a new maximum is recorded, the EP is updated with that value. Parabolic Stop and Reverse is a great indicator to help you get better entry or exit prices.

The parabolic SAR is a technical indicator used to determine the price direction of an asset, as well as draw attention to when the price direction is changing. Sometimes known as the «stop and reversal system,» the parabolic SAR was developed by J.

Can Using The Parabolic SAR With A Moving Average Give Better Results?

The image below highlights an instance in which the parabolic SAR would have kept a trader in a position even as the price rose against him. When the market is in a strong trend, as indicated by the more precipitous falls in price and more widely spaced dots, the trader is more apt to benefit. In addition to dot position, dot spacing is also revealing. At the beginning of a new trend, the parabolic SAR dots will start close together and spread further apart as momentum accelerates and the trend fully develops. The parabolic SAR is plotted directly onto a price graph and appears as a series of dots that snake above and below the price candlesticks. When the dots move below the price, it’s considered to be a bullish signal.

How to trade parabolic SAR?

Ans. The SAR curve runs along the price curve. When the SAR dots crossover the price curve from the downside, it’s a bearish signal. Similarly, it’s a bullish signal when the dots crossover the price curve from the upside.

Despite being developed before the computer age, Wilder’s indicators have stood the test of time and remain extremely popular. Investopedia does not provide tax, investment, or financial services and advice. Investing involves risk, including the possible loss of principal. As the price of a stock rises, the dots will rise as well, first slowly and then picking up speed and accelerating with the trend. The SAR starts to move a little faster as the trend develops, and the dots soon catch up to the price. The technical indicator uses a trailing stop and reverse method called «SAR,» or stop and reverse, to identify suitable exit and entry points.


The Step gradually increases as the trend extends until it reaches the maximum set by the user. The Kijun Line, or Base Line, is a component of the Ichimoku Cloud indicator. It provides trade signals when used with the Conversion Line.

A lower step moves SAR further from price, which makes a reversal less likely. Similarly, SAR sensitivity can be increased by increasing the step. A higher step moves SAR closer to the price action, which makes a reversal more likely. The indicator will reverse too often if the step is set too high. SAR follows price and can be considered a trend following indicator. Once a downtrend reverses and starts up, SAR follows prices like a trailing stop.

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