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Parabolic SAR

Developed by Welles Wilders, the Parabolic Stop and Reverse indicator, also known as SAR, PSAR, Parabolic SAR, is a technical indicator used by traders to determine trend direction. The indicator is formed by dots that follow the price at a decreasing distance. It will first start away from the price and move closer as the move extends. For an uptrend, the PSAR dots will be below the price, and for a downtrend, the PSAR will be above it. The PSAR dots are considered a trailing stop to help traders gauge when the move is exhausted. Traditionally, this strategy is always in the market, either long or short, depending on the PSAR. This indicator is well suited for strong trends but tends to have many false signals in ranging markets.