Parabolic SAR

Definition:

The Parabolic Indicator or also known as the Stop And Reverse (SAR) method is a technical display of a line of dots located either above or below price action.

Background:

As stated above, SAR denotes "Stop And Reverse," but is also known as the Parabolic Stop And Reverse (PSAR) method that is meant to be used as an indicator to be either long or short in a security based on whether price is above (long) or below (short) the PSAR line. Again, if price is trading below the parabolic PSAR line, this can be a signal to sell or remain short. On the other hand, if price is above the PSAR line, this can be a signal to buy or remain long.

The Parabolic Indicator was introduced by J. Wells Wilder.

Practical Use:

The Parabolic SAR entry and exit signals are typically the most meaningful when the price and volume of the chart being analyzed have also set up a bullish or bearish pattern. Using the PSAR for additional confirmation of what has already been "read" in the chart can be a powerful addition to the assessment tools used by a technical analyst.