Parabolic stop and reverse (SAR) is a leading trend indicator.
The parabolic SAR computes a trailing stop loss for every data point. As the data points are stop-loss points, they are away from the prices when there is a trend and cross the price line during a trend reversal. The parabolic SAR takes two parameters as input: the acceleration factor and the maximum point.
The formula for computing the parabolic SAR is not straightforward and is hence not mentioned here. If you are interested in the underlying math, please refer to the official documentation of TA-Lib on parabolic SAR at http://www.tadoc.org/indicator/SAR.htm. Although it is a good idea to know the mathematics of how this works, this recipe does not require you to understand or remember the given formula. We use a third-party Python package, talib, which provides a ready function for calculating the parabolic SAR.
Getting started
Make sure your Python namespace has the...