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The Parabolic Time/Price System, developed by Welles Wilder, is used to set trailing price stops and is usually referred to as the "SAR" (stop-and-reversal). This indicator is explained thoroughly in Wilder's book, "New Concepts in Technical Trading Systems".
Interpretation
The Parabolic SAR provides excellent exit points. It is suggested to close long positions when the price falls below the SAR and close short positions when the price rises above the SAR.
If 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. If the price is below the SAR, the SAR will move down every day, regardless of the direction the price is moving. The amount the SAR moves up or down depends on the amount that prices move.
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