#In the field of technical analysis, Parabolic SAR (SAR - stop and reverse) is a method devised by J. Welles Wilder, Jr., to find trends in market prices or securities. It may be used as a trailing stop loss based on prices tending to stay within a parabolic curve during a strong trend.
#The concept draws on the idea that time is the enemy (similar to option theory's concept of time decay), and unless a security can continue to generate more profits over time, it should be liquidated. The indicator generally works well in trending markets, but provides "whipsaws" during non-trending, sideways phases; as such, Wilder recommended establishing the strength and direction of the trend first through the use of things such as the Average Directional Index, and then using the Parabolic SAR to trade that trend.
#A parabola below the price is generally bullish, while a parabola above is generally bearish.
#"Average Directional Index": The ADX does not indicate trend direction, only trend strength. It is a lagging indicator; that is, a trend must have established itself before the ADX will generate a signal that a trend is under way. ADX will range between 0 and 100. Generally, ADX readings below 20 indicate trend weakness, and readings above 40 indicate trend strength. An extremely strong trend is indicated by readings above 50.
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