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Parabolic Stop and Reverse (SAR)

Also called Parabolic Stop and Parabolic SAR. Created by Welles Wilder, this indicator trails price as the trend extends over time.

SAR stands for: "Stop And Reverse". And that is exactly what this indicator does. It draws stops on the chart that reverse once that stop is touched by price. It is sometimes also called a "stop and reversal system".

Example

Interpretation

Looking at the dots you can easily confirm the trend and point in time where a change in trend is coming.

A dot below price is a bullish indication and a buying signal.
A dot above price is a bearish indication and a selling signal.

When a recent price high has been broken, this indicates a buy signal.
When a recent price low has been broken, this indicates a sell signal.

This indicator leads to a lot of false signals in a sideways market or consolidation.

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