Parabolic SAR.

No, SAR does not refer to Severe Acute Respiratory Syndrome, although sometimes I get similar symptoms when it all goes wrong using this forex indicator. Parabolic SAR stands for Parabolic Stop and Reverse.

parabolic sar

The Parabolic SAR- The Dotted Lines

This is a chart overlay of parabolic-shaped dotted lines (generally).

A parabola below the chart indicates a bullish sentiment, and one above indicates a bearish sentiment.

Many forex traders use these lines to set their trailing stops.

The Low Down

The Parabolic SAR is a analysis technique thought up by J. Welles Wilder, Jr. (yup, that’s his real name, he also came up with the RSI indicator), and it’s main job in life is to identify reversals in trends. It follows the trend (a lagging indicator). Use it to set a trailing stop loss or to help you set an entry or exit points, based on the theory that prices will tend to stay within the parabolic curve during a strong trend.

The stronger the trend, the better with Parabolic SAR. things tend to go a bit haywire if the direction is flipping around a bit. You can use it in conjunction with the Average Directional Index which will help you work out how strong the trend is.

Parabolic SAR and the Stop-Loss Order
The parabolic SAR really comes into its own in helping you set your stop-loss, and lock in profits built up in a trend. As with all technical forex indicators, it is better use more than one indicator. Parabolic SAR are often used with stochastics and moving averages.

Just be careful if the trend isn’t strong, however. The Parabolic SAR can often give out signals if the price movement is choppy.

Use Parabolic SAR on the Charts at the Following Forex Brokers

Broker Min Account Size Leverage Spread US Traders Review Open Account
AvaTrade $100 1:200 3-5 majors Review Visit Broker Demo
XM $100 1:888 1 pip majors Review Visit Broker Demo
OptionBit Review Visit Broker Demo