The parabolic SAR attempts to give traders an edge by highlighting the direction an asset is moving, as well as providing entry and exit points. In this article, we'll look at the basics of this indicator and show you how you can incorporate it into your trading strategy. We'll also look at some of the drawbacks of the indicator.
KEY TAKEAWAYS
- The parabolic SAR indicator, developed by J. Welles Wilder Jr., is used by traders to determine trend direction and potential reversals in 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 parabolic SAR indicator appears on a chart as a series of dots, either above or below an asset's price, depending on the direction the price is moving.
- A dot is placed below the price when it is trending upward, and above the price when it is trending downward.
