Parabolic SAR MT4 Stock Indexes Indicator and Parabolic SAR Indices Trading Signals
Developed by J. Welles Wilder and is used to set trailing stock indexes price stops. This indicator was originally developed to analyze trending Indices Trading Markets. It is drawn as a stock indices chart overlay, that is on the stock indexes price chart itself.
This is a very accurate indicator for providing exit points and thus it is used to set trailing stops and is usually referred to as the "SAR" (stop-and-reversal).
This indicator is drawn above or below the stock indexes price - it is drawn as a series of dots. The length of movement of the SAR will be determined by the scale of the stock indexes price movement.
In an upward indices trend the parabolic SAR will be below the indices price. As long as the up indices trend continues then the SAR will continue being below the indices price. When stock indexes price move down and the parabolic SAR goes above the stock indexes price then the Indices trend reverses to bearish.
This indicator uses a parabolic calculation to draw the series of dots, This means that if the stock indexes price stops moving up with the same acceleration, the parabolic will continue with the same acceleration thus at some point the stock indexes price will hit the indicator if it slows down too much.
This indicator provides excellent exit points. You should close long positions when the stock indexes price falls below the SAR and close short positions when the stock indexes price rises above it.
If you are long, the SAR will move up every day, regardless of the direction the stock indexes price is moving. The amount this indicator moves up depends on the amount that indices prices move.
The same theory will also apply to a Indices Trading downward trend, the parabolic SAR will be above the stock indexes price and it should remain above the stock indexes price until the bearish down indices trend reverses.
The chart below shows an example of the Parabolic SAR in an up indices trend market, You can see how it trailed below the indices price(Bullish Indices Trading Market) until when it was hit and the indices trend reversed.