Parabolic SAR Technical Analysis & Parabolic SAR Stock Trade Signals

Developed 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 stock market price
• In a down-wards trend, the stop and reversal will trail above the stock market price

Technical Analysis & How to Generate Trading Signals

This technical indicator provides excellent exit points.

Exit Indices Trade Signal for Buy trades

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

If you are trading long i.e. The price is above the stop and reversal, the SAR 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 prices move. When the SAR changes the direction then the market trend also changes to down. This generates the exit signal for long trades.

Exit Stock Trade Signal for Sell trades

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

If you are trading short i.e. The 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 prices move. When the SAR changes the direction then the market trend also changes to up. This generates the exit signal for short trades.

Exit Signal for Buy and Sell trades