Parabolic SAR Indicator: Your Guide to Understanding Trend
The Parabolic SAR, or "Stop and Reverse" indicator, is a tool for technical analysis that helps traders identify market direction and timing for entering or exiting a trade. It appears on the chart as small points above or below the candles.
Points below the price indicate an upward trend.
Points above the price indicate a downward trend.
Its mechanism works by tracking price movement in an accelerated manner, and the longer the trend continues, the closer the points get to the price until a breakout or reversal occurs.
The indicator is used for:
1. Determining the overall trend.
2. Adjusting the stop-loss to protect profits.
3. Providing trend reversal signals.
However, caution is advised, as the indicator can give false signals in sideways markets, so it is preferable to combine it with other indicators like RSI or MACD to confirm decisions.
