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Parabolic
SAR
Description
The Parabolic
Time/Price System, developed by J. Welles Wilder,
is explained thoroughly in his book, New
Concepts in Technical Trading.
This indicator is used to set price stops
and is often called the stop-and-reversal (SAR)
indicator.
Interpretation
If
you are long (i.e., the price is above the SAR),
the SAR will move up every day, regardless of the
direction the price is moving.
The amount the SAR moves up depends on the
amount that prices move.
The
Parabolic SAR provides excellent stops.
You should close long positions when the
price falls below the SAR and close short
positions when the price rises above the SAR.
The
Parabolic SAR is plotted as shown in Wilder's book
(above). Each
SAR stop level point is displayed on the day in
which it is in effect.
Note that the SAR value is today's, not
tomorrow's stop level. |
