Parabolic SAR (SAR) indicator

Parabolic SAR (SAR) is a technical indicator that is commonly used by traders to identify potential reversals in price movement. SAR stands for "stop and reverse," as the indicator can be used to determine when to exit a trade and enter a new position in the opposite direction. The indicator is calculated based on the price action of the asset being analyzed.

The formula for calculating the Parabolic SAR is as follows:

• SARt+1 = SARt + α(EP - SARt)

Where:

• SARt: the SAR value for the previous period
• SARt+1: the SAR value for the current period
• α: acceleration factor, which starts at 0.02 and increases by 0.02 each time a new extreme point is reached, up to a maximum of 0.2.
• EP: the highest high or lowest low of the current trend, depending on whether the trend is bullish or bearish.

The Parabolic SAR is plotted as a series of dots above or below the price action, depending on the trend direction. When the dots are below the price action, it suggests a bullish trend, and when the dots are above the price action, it suggests a bearish trend.

When the price crosses over the dots, it is a signal to reverse the current position. For example, if the dots are below the price action and the price crosses above the dots, it is a signal to exit a short position and enter a long position.

The Parabolic SAR is a popular indicator for trend-following traders, as it can help identify potential reversals in price movement and provide clear signals for when to enter or exit a trade. However, like all technical indicators, it should be used in conjunction with other forms of analysis and risk management strategies to avoid false signals and minimize losses.