🧠 What is Parabolic SAR?
The Parabolic SAR (Stop and Reverse) is a popular trend-following indicator developed by J. Welles Wilder.
👉 It helps traders identify:
- Trend direction 📈📉
- Potential reversals 🔄
- Entry & exit points ⚡
- Trailing stop-loss levels 🎯
📊 How Parabolic SAR Works
🟢 Dots Below Price
- Bullish trend 🚀
- Buyers in control
🔴 Dots Above Price
- Bearish trend 📉
- Sellers dominate
🔄 Dot Flip
- Possible trend reversal
📐 Parabolic SAR Formula
SARn=SARn−1+AF×(EP−SARn−1)
Where:
- SAR = Current indicator value
- AF = Acceleration Factor
- EP = Extreme Price (highest high or lowest low)
📈 Trading Signals
✅ Buy Signal
- SAR dots move below price
- Bullish trend confirmation 🚀
❌ Sell Signal
- SAR dots move above price
- Bearish trend confirmation 📉
🎯 Trading Strategy
Buy Setup 🚀
- Price above SAR dots
- Strong bullish candles
- Trend confirmation
Sell Setup 📉
- Price below SAR dots
- Strong bearish momentum
- Reversal confirmation
📊 Trailing Stop-Loss Use
👉 Many traders use SAR dots as:
- Dynamic stop-loss
- Trade exit guide
Example:
- In uptrend → stop-loss below SAR dots
- In downtrend → stop-loss above SAR dots
⚠️ Important Tips
✔ Works best in trending markets
✔ Can give false signals in sideways markets
✔ Combine with:
- ADX
- RSI
- Moving Averages
- Price Action
📊 Default Settings
- Acceleration Factor (AF) = 0.02
- Maximum AF = 0.20
🧠 Key Takeaway
👉 Parabolic SAR = Trend + Reversal Indicator
👉 Great for:
- Trend-following
- Trailing stop-loss
- Swing trading