Parabolic SAR Analysis & Parabolic SAR
Developed by J. Welles Wilder & is used to set trailing price stops. This Trailing Stop Loss Order Indicator was originally developed to analyze trending Gold Trading Markets. It is drawn as a chart overlay indicator, that's on the xauusd price chart itself.
This is a very accurate indicator for providing exit points & thus it is used to set trailing stops & is usually referred to as the 'SAR' (stop-and-reversal) - Trailing Stop Loss Order MT5 Indicator.
This Trailing Stop Loss Order MT5 Indicator is drawn above or below the xauusd price - it's plotted as a series of dots. The length of movement of SAR is determined by scale of xauusd price movement.
In an upward trend the parabolic SAR will be below the xauusd price. As long as the up trend continues then SAR will continue to being below the xauusd price - Trailing Stop Loss Order Indicator. When xauusd price move down and the parabolic SAR goes above xauusd price then the trend reverses to bearish.
This trailing stop loss indicator uses a parabolic calculation to draw the series of dots, This means that if the xauusd price stops moving upwards with the same acceleration, the parabolic SAR will continue with same acceleration thus at some point xauusd price will hit the indicator if it slows down too much.
Interpretation
This Trailing Stop Loss Order MT5 Indicator provides excellent exit points. You should close long positions when price falls below SAR and close short positions when price rises above it.
If you are long, the Parabolic SAR - Trailing Stop Loss Order MT5 Indicator will move up every day, regardless of direction the xauusd price is moving. The amount this indicator moves up depends on the amount that xauusd prices move.
The same technical analysis also will apply to a downwards trend, the parabolic SAR - Trailing Stop Loss Order MT5 Indicator will be above the xauusd price and it should remain above price until the bearish down trend reverses.
The chart below shows an example of Parabolic SAR in an up trend market, You can see how it trailed below xauusd price (Bullish Trading Market) until when it was hit & the trend reversed.
