Parabolic Regression Stop And Reverse SourceCode

Parabolic Regression Stop and Reverse Indicator

The Parabolic Regression SAR is a technical indicator used in trading to identify potential trend reversals. It combines elements of both the Parabolic SAR and linear regression. Here’s what you need to know:

Overview

• The Parabolic Regression SAR calculates a dynamic trailing stop level that adjusts based on price movement.
• It provides potential entry and exit points by plotting dots above or below the price chart, indicating potential trend reversals.
• The indicator is particularly useful in trending markets.

How It Works

• Calculation:
• The Parabolic Regression SAR is calculated using the following formula:
• SAR=SARprev​+Step×(EP−SARprev​)
• Where:
• SARprev​ is the previous SAR value.
• $\text{Step}$ is the acceleration factor (usually 0.02).
• $\text{EP}$ (Extreme Point) is the highest high (for downtrends) or lowest low (for uptrends) over a specified period.
• The SAR value is plotted on the chart as dots above or below the price.
• Direction Switch:
• When the price crosses the SAR value, the indicator switches direction (from bullish to bearish or vice versa).
• The SAR value adjusts dynamically as new price data becomes available.

Key Features

• Adaptive Stop Level:
• The Parabolic Regression SAR adapts to changing market conditions, tightening the stop level during strong trends and loosening it during sideways or choppy markets.
• Visual Clarity:
• The dots plotted on the chart make it easy to identify potential reversal points.
• Trend Confirmation:
• When the price is above the SAR, it suggests a bullish trend.
• When the price is below the SAR, it suggests a bearish trend.

Strategy

• Long Trades:
  • Enter long (buy) when the price crosses above the SAR.
  • Place a stop loss below the SAR.
  • Exit the trade when the SAR switches direction (price crosses below the SAR).
• Short Trades:
  • Enter short (sell) when the price crosses below the SAR.
  • Place a stop loss above the SAR.
  • Exit the trade when the SAR switches direction (price crosses above the SAR).

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