Parabolic Stop And Reverse
Type
Trend indicator
Short introduction
Welles Wilder developed the Parabolic SAR (PSAR) around a stop mark. In addition to the stop mark, the price development and time are included in the indicator.
Statement
The PSAR is constantly in the market, which means that every time the PSAR cuts the price curve, a trading signal is triggered. Please note that the PSAR requires a certain "warm-up time" and therefore the first signals should be ignored.
Formula/calculation
SARn = SARn-1 + (AF × (EPlast - SARn-1))
where:
SARn = Current SAR value
SARn-1 = SAR value of the previous day
EPlast = Extreme price of the last trend phase (high in uptrends, low in downtrends)
AF = Acceleration factor
The calculation of the PSAR is complex. We therefore recommend that you study the relevant literature.
Interpretation
The PSAR always fluctuates around the actual price trend. When a trend is formed, the PSAR approaches the price trend more and more, a cut of the PSAR with the price trend finally triggers the signal. The PSAR works primarily in very strong trend markets, in trendless markets the PSAR almost only provides false signals.
Default setting
- Daily
- Period 14 days
- Acceleration factor 0.02
- Maximum acceleration factor 0.2
Example: PSAR
