Parabolic Stop And Reversal (SAR)

Charting Indicators — October 12, 2010 at 12:46

The parabolic stop and reversal (SAR) is a popular indicator used when you want to know what the short-term momentum of a stock is. The indicator consists of a series of dots placed either above or below the current stock price, depending on its momentum. A dot is placed below the price when the trend of the asset is upward, while a dot is placed above the price when the trend is downward.

When the position of the dots reverses direction, and is placed on the opposite side of the price, it generates a buy/sell signal.

However, using this indicator alone is not advisable because you might enter or exit a position prematurely. If you’re trading or contra-ing, the SAR value is a good cut-loss point, because any move past that price will signal a reversal, allowing you to anticipate a move in the opposite direction.

Tags: asset, buy sell, current stock price, dots, indicator, ing, momentum, position, series, trend