A time/price reversal system that is always in the market. 

  • It is a trend following system
  • SAR stands for Stop and Reverse  
  • Works well in trending markets – useless in trading ranges

Notice as prices trend higher, the rising dots below the price action tend to start out slower and accelerate

In a downtrend the same thing happens, but in the opposite direction.

Parabolic SAR looks like dots on a chart. 

  • Buy signals given when upper SAR was hit (arrows 1 and 2). 
  • Whipsaw at arrows 3 – 4 indicated trading range with Buy signal acceleration as price advanced in new uptrend.

Parabolic SAR on monthly charts can be used to track the primary long-term trends.

Interpretation

  • The SAR is a delayed system since the SAR number is available only on the next period. 
  • Each day/period the stop moves in the direction of the new trend.
  • At first, movement is slow but accelerates as the trend becomes more established.

Conclusion:

A time / price reversal system that is always in the market. 

  1. Prices trend higher, rising dots below price
  2. Prices trend lower, falling dots above price

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