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This is a form of technical analysis which allows you to determine good exit and entry points to trade. It does so by trailing Stop And Reverse (SAR).
In trading it is important to know when it’s a good time to enter and when it is a good time to exit or not to enter, the PSAR or parabolic stop and reverse allows you to do just that. It is basically allows you to know when to sell (when trading is below the PSAR) or when to buy (when the Trade is above the PSAR line).
Parabolic indicator is used in EA’s strategy combined with other indicators to determine the good entry points and exit points to sell and buy, when using it with stochastic strategy or with the correct stop loss settings the profit can be huge.
Screenshot from stockcharts.com showing the parabolic SAR
taken from – stockchart.com