The parabolic SAR is a technical indicator that forecasts potential reversals in the market. It can be a bullish market changing into a bearish, or a bearish market changing into bullish.

Welles Wilder first presented it in 1978 in his book “New Concepts in Technical Trading Systems.”

You need to understand the signals to trade with the parabolic SAR. The indicator will produce a series of dots – a parabolic line – above and below the price fluctuations in an asset’s market chart.

You would open a trade up when the dots move below the current asset price. Alternatively, you would open a trade down when the dots move above the current asset price.

After a series of above dots, traders often consider the first below dot to signal a reversal from the bearish trend. And vice versa: the first above dot signals a reversal to the bearish trend.

Of course, the signals given by the parabolic SAR are not always wholly accurate, and you must include fundamental and technical analysis in your trading session.