Although it is important to be able to identify new trends, it is equally important to be able to identify where a trend ends.
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A Parabolic SAR places dots, or points, on a chart that indicate potential reversals in price movement. From the image above, you can see that the dots shift from being below the candles during the uptrend to above the candles when the trend reverses into a downtrend.
The nice thing about the Parabolic SAR is that it is really simple to use. This is probably the easiest indicator to interpret because it assumes that the price is either going up or down.
With that said, this tool is best used in markets that are trending, and that have long rallies and downturns. In early June, three dots formed at the bottom of the price, suggesting that the downtrend was over and that it was time to exit those shorts. You cannot teach a man anything; you can only help him find it within himself.
Galileo Galilei. Partner Center Find a Broker.