How to use parabolic Stop and Reverse ? Parabolic SAR is a trend following indicator and is also popularly used among traders to set trailing stop losses. The indicator was developed by Welles Wilder, who also developed and introduced the Average True Range, RSI, and Directional Movement (ADX) to the public in the late 1970s. All of these indicators remain widely popular today.

1. Chapter – 12
PARABOLIC STOP AND REVERSE
( SAR)

2. • Parabolic SAR is a trend following indicator and is
also popularly used among traders to set trailing
stop losses.
• The indicator was developed by Welles Wilder, who
also developed and introduced the Average True
Range, RSI, and Directional Movement (ADX) to the
public in the late 1970s. All of these indicators
remain widely popular today.
PARABOLIC SAR

3. • Parabolic SAR was originally named “Parabolic
Time/Price System” with SAR an acronym for “stop
and reverse”. Technical analysts often refer to the
indicator as simply “SAR” by itself.
• Part of the indicator’s popularity stems from its
easy interpretation. It is distinct in that instead of
lines, ranges, or “clouds” it uses dots to convey
information on the chart.
PARABOLIC SAR

4. • Dots that form underneath price and are rising in
an upwardly sloping pattern suggest an uptrend.
Dots that form above price and are falling in a
downwardly sloping pattern suggest a downtrend.
They may also represent the price where a trader
could place a trailing stop, depending on whether
SAR is used for this purpose.
PARABOLIC SAR

6. Parabolic SAR is regularly used to track trends. It also serves as a
guide for where traders should place their stop-loss to limit the
downside and/or protect the profit associated with their trades.
The progressive dot configuration of the indicator functions very
similarly to the adjustment of a trailing stop.
The settings of the indicator can be adjusted from its step and
maximum value of .02 and .20, respectively.
Those wanting to increase the sensitivity of the indicator – which
gives rise to more frequent changes in the trend (as diagnosed by
the SAR) and tighter trailing stops – should increase the step and
maximum value.
Those wanting to decrease the sensitivity of the indicator – less
frequent changes in the trend and looser trailing stops – should
decrease the step and maximum value.
CONCLUSION