Parabolic Stop and Reverse indicator more commonly known as PSAR was developed by Welles Wilder and introduced in 1978.
It comprises of three main components:
- The previous SAR value
- Extreme point, which is the highest point of the current trend
- Acceleration factor, which is 0.02 and increases by 0.02 each time the extreme point moves to a new high in an uptrend or a new low in a downtrend.
When the price is rising in an uptrend, the PSAR appears below the price and it trails the price in time and when the price is in a downtrend, the PSAR appears above the price and it trails the price in time.
PSAR indicator is a trending indicator and can be used effectively in any time frame to identify a change in trend. It is also used by many to trail a stop loss.
PSAR is a very popular indicator and is used by many traders to successfully execute trades.
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