Definition
Parabolic SAR (Stop and Reverse) places dots above or below price to indicate trend direction and potential reversal points. Dots below price signal uptrend; dots above signal downtrend. The acceleration factor increases as the trend continues.
Formula
SAR = Previous SAR + AF × (EP - Previous SAR)
Example
When dots flip from below to above price, it signals a potential trend reversal from bullish to bearish. Traders may use these flip points as stop-loss levels.
FAQ
What is Parabolic SAR?
A trend-following indicator that provides potential stop and reverse points.
How do you calculate Parabolic SAR?
A common formula for Parabolic SAR is: SAR = Previous SAR + AF × (EP - Previous SAR)
Why is Parabolic SAR important?
Parabolic SAR helps investors evaluate technical analysis and make more informed decisions.