Parabolic Stop and Reverse

The purpose is to provide signals of market trend turning, including take profit and stop loss signals.  When a fast trend (whether up or down), the SAR indicator analyzes price and time, the indicator will form a parabola, so the SAR indicator is also called "parabolic indicator".
As a trader, the most difficult topic is how to "stop profit at the maximum value and stop loss at the minimum value." If you don't have a set of standard rules in your mind, you will definitely be at a loss, then SAR is your best  The helper, when the market rises and falls, it simply and clearly tells you the timing and price of the long-short conversion.
Principle of SAR Parabolic Indicator
SAR assumes that the price trend is a parabolic movement, and gives it a momentum trend indicator to make it closer to the current price, such as the price and the pointer cross and there is a signal, and then use this as a criterion to formulate strategies and establish positions.
When SAR is applied, it is consistent with the concept of trailing stop.  When the price trend continues, by moving the stop loss point up or down continuously, in order to lock in the profit of the position.
SAR calculation formula
The calculation of SAR needs to refer to the highest and lowest prices of each day:
SAR(Today): SAR(Yesterday) + AF (Momentum Trend Indicator) x [ (Range Extremum (the most extreme value in the band) – SAR(Yesterday)]
Two nouns need to be introduced here:
AF (Momentum Trend Indicator)
AF is a calculated acceleration change factor, and the value of the acceleration change factor x (the difference between the range extreme value and yesterday's SAR) can be closer to the current price.  The starting value of AF is 0.02. During a rally, as long as today’s highest price is higher than yesterday’s highest price, AF can be +0.02; similarly, in a downtrend, as long as today’s lowest price is lower than yesterday’s lowest price, it also needs +0.02;  But as long as today's high price is not higher than yesterday's or today's low price is not lower than yesterday's, AF will not increase.  However, the upper limit of the maximum value of AF is 0.2. Whether the price is higher than yesterday or lower than yesterday, the AF value is 0.2. Based on the above, it can be seen that the value of AF will only increase or remain unchanged, and it is impossible to decrease.  even dropped to 0.
Interval extreme
The range extremum refers to the highest price between the bands (when the SAR is below the K line) and the lowest price in the falling band (when the SAR is above the K line).  The range extreme value of each day is definitely the lowest or highest point in the current band, and the SAR of the day of reversal is directly substituted into the calculation of the range extreme value of the previous day.
When the SAR trend is bearish, the SAR will fall in sync with the price over time, but if the price rises and touches the SAR on the day, it will reverse to the bottom of the price and turn into a long SAR, while holding a short position  The person who holds the position can choose to reduce the position or take profit after the K line appears, and vice versa for the long position.
Let's briefly explain the formation of the SAR curve: when the price is in an upward (downward) trend, the SAR at the lower (upper) edge will also rise (down), but the speed of the SAR rise (down) depends on whether the latest K line is  The new high (low) point in the invasive band, and this rising (falling) speed will eventually move in a "decreasing incremental" manner, that is, connecting each parabolic point will form a curve until the final rise (  If the kinetic energy of falling) is lost, the price will fall (rise) below the current SAR value, and the parabola formed by this point is the same as the final fall of the shell.
Advantages and disadvantages of the SAR indicator
The use of SAR is similar to the method of crossing and falling below the average line, except that the SAR directly gives a clear point, and when the price touches, it will reverse directly and reserve space for the next long-short conversion, but this  It is also the place where SAR is contradictory. When encountering a reversal, traders are given space, but if the market fluctuates too much when entering the market, the probability of hitting SAR in a short time is not high, but as long as it is touched, it will be a considerable loss.
When the SAR pointer reverses, it is usually at the relative high and low points of the price trend. However, after entering the market, traders must not forget that the AF after the current reversal is the minimum value (that is, it is calculated from 0.02),  Therefore, if there is no trend or a high (low) pass for a period of time, the entry position may become closer and closer to the SAR point, which will eventually trigger the stop loss.
SAR Indicator Advantages
Long and short judgment is very simple, and the conversion point is very obvious
When the trend is clear, indicators allow traders to grasp the market within the band
Stop loss and stop profit are very useful.
SAR Indicator Disadvantages
The entry point needs to be found by yourself, which is the most difficult point in this indicator
When the fluctuation is too large, the SAR will be continuously converted, the probability of triggering stop loss is high and the loss will be large
When the volatility is too large, the arbitrage exit point is often far from the best point
There is a lack of standards for the use of cycle length.

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