UK Accounting Glossary
The Parabolic SAR provides a stop level for closing (or reversing) positions: long positions should be closed when the Parabolic SAR rises above the price and short positions should be closed when the Parabolic SAR falls below the price. Some technical analysts use the stop level to enter a position in the opposite direction.
Generally, the Parabolic SAR indicator is represented as a dot above or below the price series. When the dot is above the daily price then an open short position is implied. Conversely, when a dot is displayed below the daily price then an open long position is implied. The dot represents the stop level. When a new position is established a wide stop is used. As time progresses the stop tightens.
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This glossary post was last updated: 23rd March 2020.