In the stock market, SAR usually refers to the Parabolic SAR or Stop and Reverse indicator, with the full English name being 'Stop and Reverse'. A detailed introduction is as follows:
- Meaning: The SAR indicator was created by American technical analyst J. Welles Wilder and is an analysis tool that weighs both price and time. This indicator predicts the peaks or troughs of stock prices by calculating a series of points known as SAR points, which move in a parabolic manner, hence also referred to as 'Parabolic Turning'.
- Function:
- Determine trend direction: When the stock price is above the SAR indicator, it usually indicates that the market is in an uptrend; conversely, when the price is below the SAR indicator, it suggests that the market is in a downtrend.
- Determine stop-loss and profit points: Investors can use the position of the SAR indicator as a reference for stop-loss levels. In an uptrend, when the price falls below the SAR indicator, it suggests that the uptrend may be ending, and one might consider reducing positions or exiting to control losses; in a downtrend, if the price breaks above the SAR indicator, it may signal the end of the downtrend, and one could intervene at the right time. When the price breaks above the SAR indicator and continues to move away, it can also serve as a reference signal for profit-taking.
- Enhance trading discipline: The SAR indicator provides clear buy and sell signals, helping investors overcome emotional interference, follow established trading strategies, and avoid blindly following trends or impulsive trading.
- Viewpoint:
- Observe the relative position of the indicator and stock price: When the stock price starts to break upwards from below the SAR curve, it is a buy signal, indicating that the stock price may embark on an upward trend; when the stock price continues to move upwards after breaking the SAR curve, and the SAR curve also moves upwards simultaneously, it indicates that the upward trend of the stock price has formed, with the SAR curve providing strong support for the stock price. Conversely, when the stock price starts to break down from above the SAR curve, it is a sell signal, suggesting that the stock price may embark on a downward trend; if the stock price continues to move downwards after breaking the SAR curve, and the SAR curve also moves downwards simultaneously, it indicates that the downward trend of the stock price has formed, with the SAR curve exerting significant pressure on the stock price.
- Pay attention to color changes: In many trading software, the SAR indicator is represented by red and green dots. Generally, red dots represent an uptrend, while green dots represent a downtrend. When green dots turn into red dots, it often indicates an opportunity for stock price intervention; when red dots turn into green dots, it signals a sell.
- Combine analysis with other indicators: To improve the accuracy of judgments, the SAR indicator can be used in conjunction with other technical indicators such as MACD, RSI, moving averages, etc. For example, when the SAR indicator issues a buy signal, if the MACD also presents a golden cross or other bullish signals, the reliability of the buy signal may be higher.