A stop and reverse (often known as SAR
) is a type of stop loss order
that exits the current trade, and either simultaneously or immediately afterwards, enters a new trade in the opposite direction. Stop and reverse orders combine elements of trade management and risk management, and are used in place of regular stop loss orders.
Stop and reverse orders are used when a trader wants to reverse their position (hence the name stop and reverse).
For example, if a trader is in a long trade, and wants to exit the long trade and enter a short trade at the same price (but you will lose the bid
/ask spread), they would use a stop and reverse order. The same task could be accomplished manually (i.e. placing an exit order, followed by an entry order), but stop and reverse orders are more efficient as they can combine the entry and exit into a single order.
Also known/called Reversing, Reverse, Reversed.
Many trading platforms have a trading button/icon that achieve this with one mouse click.
Linked to Revenge Trading
in that many traders will reverse a trade in revenge when the current trade's direction is not working in an attempt to 'make the loss back' by trading in the other direction.