Parabolic SAR (stop and reversal)
The Parabolic SAR is a system developed by Welles Wilder that helps determine trailing stops for both long and short positions. Wilder recommended using the dotted lines below the price as a stop for a long position and the dotted lines above the price as a stop for a short position.
Wilder's goal was to capture as much of a trending move as possible. At the beginning of a move there will be a decent cushion between a stock's price and the dotted line, but as the move progresses the dotted line will get closer and closer to the stock's price thereby tightening one's stop.
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