Parabolic

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Parabolic

Parabolic or Parabolic SAR is calculated using the formula:[1]:

SAR_{n+1} = SAR_n+ α( EP – SAR_n )

The Parabolic or Parabolic SAR was popularized by J.Welles Wilder.The indicator's name derives from the shape it takes on the chart. When Parabolic SAR first generates a buy or sell signal, its slope is relatively flat. As time progresses the more sharply the dots of the Parabolic rise, until they meet the price line on the chart and signal a potential reversal of the trend. It is generally felt that the Parabolic is most useful in trending markets and to indicate stop placement. When using the Parabolic, long positions should be taken when price action is above the dots placed on the chart by the Parabolic SAR and short positions should be taken when prices are below the line of dots placed by the Parabolic SAR. [2]:

References

  1. Yahoo Finance. Yahoo.
  2. Street Authority. .