Parabolic SAR: How to spot a buy/sell signal in stock trading?
1. Introduction
The SAR (stop and reverse) indicator is similar to a moving average in that it is also an analysis tool that emphasizes both price and time. It is a popular indicator that is mainly used by traders to determine the future short-term momentum of a given asset.
The indicator uses a trailing stop and reverse method abbreviated to "SAR" to determine favorable exit and entry points. Sometimes the indicator is also called Parabolic SAR as the graph is presented in a way that resembles a parabola.
2. Formula
SAR(Tn)=SAR(Tn-1)+AF(Tn)*[EP(Tn-1)-SAR(Tn-1)]
Where SAR (Tn) is the SAR value of the 'n'th period, SAR (Tn-1) is the SAR value of the 'n-1'th cycle, AF is the acceleration factor, and EP is the extreme price.
EP is the extreme point in a trend (highest point reached by a price during an uptrend or the lowest price reached during a downtrend).
AF is the acceleration factor which is initially set to a value of 0.02 (it is increased by 0.02 each time the EP is recorded, with a maximum of 0.20). Traders can choose the acceleration factor depending on their trading style or the specific stock being traded).
3. Indicator Application
● If the stock price is above the SAR parabola, the price trend is bullish (upward).
● If the stock price is below the SAR parabola, the price trend is bearish (downward).
As you can see from the chart below, transaction signals are generated when the position of the dots reverses direction and is placed on the opposite side of the price.
● When the stock price rises above the SAR parabola, a buy signal emerges.
● When the stock price falls below the SAR parabola, a sell signal emerges.
4. Operation Guidelines
4.1 Select Indicator
Path: Detailed Quotes of a Stock - Indicator Bar - Select SAR
4.2 Search to Add the Indicator
Path: Detailed Quotes of a Stock - Chart Settings - Add Indicator - Search
4.3 Set Indicator Parameters
Path: Detailed Quotes of a Stock - Chart Settings - Tap SAR - Change Parameters
To learn more about technical indicators and trends, follow us for updates!
Moomoo Courses:
https://live.moomoo.com/college
Moomoo Courses:
https://live.moomoo.com/college
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
Moomoo Official Account
Let’s learn how to trade with moomoo!
Check out my tutorial.
48KFollowers
140Following
21KVisitors
Follow
J100 : Thanks
103126287 : Good and potential company
Investing with moomoo OP J100 :
Investing with moomoo OP 103126287 :
aloysius123 : good
randomcheetah : How do I see if my profit has been deposited into my withdrawal cash? Tku
TOMAW : But after we see the buy/sell signal appearing, the subsequent price that we can buy/sell will not be at its lowest/highest value right?
Investing with moomoo OP TOMAW : Yes. Please note that technical indicators are based on historical data and volume, and determine the likely direction of future prices. But it's no guarantee that they are always 100% correct.
Investing with moomoo OP aloysius123 : thx
Investing with moomoo OP randomcheetah : Please refer to https://live.moomoo.com/course/1330 or contact customer service reps for operational questions. Thank you.
View more comments...