Strategy
Posted On: December 11, 2025
Trade Smarter with the PSAR Strategy
The Parabolic SAR (PSAR) is a popular trend-following indicator developed by Welles Wilder. It helps traders identify potential reversals and find precise entry and exit points. The indicator appears as a series of dots placed above or below the price.
When the dots switch positions, it signals that momentum in the market may be changing. Because of its clarity and visual simplicity, PSAR is widely used in intraday, swing, and positional trading
Buy and Sell Signals Using PSAR
Buy Signal
A buy signal is generated when:
PSAR dots move below the price, indicating upward momentum
Trend is beginning to shift from bearish to bullish
Action:
Traders look for long entries when the first dot appears below the candle.
Sell Signal
A sell signal occurs when:
PSAR dots shift above the price, showing sellers are gaining control
Trend may be reversing from bullish to bearish
Action:
Traders consider short positions when the first dot moves above the candle
PSAR in Trending Markets
PSAR performs best when the market is moving strongly in one direction.
Uptrend
Dots remain below the price
Indicates strong bullish momentum
Traders stay in long positions and trail their stop-loss using PSAR dots
Downtrend
Dots form above the price
Shows strong bearish pressure
Traders remain in short positions and let the PSAR guide their exits.
Conclusion
The PSAR strategy is a powerful yet simple tool for identifying trend direction and potential reversals. It gives clear, easy-to-read buy and sell signals and works best in strong trending markets. By using PSAR to trail stops, traders can protect profits and stay aligned with momentum. When combined with other indicators, PSAR becomes even more effective and reliable for day trading, swing trading, and long-term analysis.
Where can I see further insights on this stock?
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Mastering PSAR can help traders improve timing, reduce emotional decisions, and trade trends with confidence.
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