How Parabolic SAR works

The Parabolic SAR is usually represented in the chart of an asset as a set of dots that are placed near the price bars. Generally, when these dots are located above the price, it signals a downward trend and it is deemed to be a sell signal. When the dots move below the price, it shows that the trend of the asset is upward and signals a buy.
The change in the direction of the dots produces trade signals which can produce a profit when the price makes big swings. However, the indicator is not as reliable in a flat or ranging marekt. The movements are demonstrated in the chart below:

When the price of a security rises, the dots also rise. The pace accelerates with the trend. The Parabolic SAR works well for capturing profits by entering the trade during a trend in a steady market.
It may produce false signals when the price moves sideways, and the trader should expect small losses or small profits. The indicator can also be used used to set stop loss orders. This can be achieved by moving the stop loss to match the level of the SAR indicator. $Apple (AAPL.US)$ $Amazon (AMZN.US)$ $Microsoft (MSFT.US)$ $Tesla (TSLA.US)$

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