Parabolic SARSAR

Parabolic SAR plots dots above or below the price that move closer as a trend continues and flip sides when it reverses, often used for trailing stops.

Parabolic SAR places dots below price in uptrends and above price in downtrends. The dots tighten as a trend runs, so many traders use them as a trailing stop.

Category
Indicators and Tools
Reading time
3 min
Also called
Parabolic stop and reverse, Wilder SAR
Updated

Parabolic SAR in plain words

Welles Wilder designed the Parabolic SAR as a trading system based on both price and time.1

Its dots form a curve that sits below price in an uptrend and above price in a downtrend.2

SAR follows prices like a trailing stop, and when price crosses it, the system flips direction.1

How Parabolic SAR is calculated and used

  1. Find the extreme point

    Track the extreme point (EP): the highest high of an uptrend or the lowest low of a downtrend.2

  2. Set the acceleration factor

    Apply the acceleration factor (the “step”), which controls how quickly the SAR closes in on price.1

  3. Update each bar

    New SAR = prior SAR + AF × (EP − prior SAR).

  4. Raise AF on new extremes

    Increase AF by the step each time a new EP is made, up to a maximum.

  5. Trail the stop

    Let the stop keep rising for as long as the uptrend lasts.1

  6. Stop and reverse

    When price crosses SAR, close the trade and start a new SAR on the other side.

Worked examples

Example 1 — One update

Stop raised

A hypothetical uptrend: prior SAR 50.00, EP 55.00, AF 0.02.

Example 1 — One update — calculation
AF × (EP − SAR)0.10
New SAR50.10

SAR follows prices like a trailing stop, edging up toward price.1

Example 2 — Reversal

Flip to short

A hypothetical stock with SAR at 48.30 drops to 48.00.

Example 2 — Reversal — calculation
Price48.00
SAR48.30

Price broke below SAR, so the parabola moves above price for a bearish trend.2

Example 3 — Choppy range

Whipsaw

A hypothetical pair flips SAR side 6 times in 10 days.

Example 3 — Choppy range — calculation
Flips6

In a sideways market the indicator flips back and forth constantly — whipsaws are the norm when there's no trend.1

Parabolic SAR vs ATR trailing stop

AspectParabolic SARATR-based stop
Speeds up over timeYes, via AFNo
Based onExtreme pointsVolatility
Always in marketYes, stop and reverseNo
Weak in rangesYesLess so

Where Parabolic SAR is used

  • Trailing exits

    Manage a Trailing Stop in a trend.

  • Trend direction

    Dot side shows Trend direction.

  • Stop placement

    Replace a fixed Stop Loss.

  • Pair with ADX-style filters

    Avoid ranges by checking Volatility and trend strength.

Advantages and disadvantages

Advantages

  • Clear, visual stop levels.
  • Tightens automatically as trends mature.
  • Simple rules.
  • Keeps losses contained in trends.

Disadvantages

  • Many whipsaws in ranges.
  • Always in the market by design.
  • Sensitive to AF settings.
  • Can exit strong trends early.

Going deeper

Read as far as you need. Each level builds on the one before it.

Built for trends

Beginner

Wilder estimated markets trend only about 30% of the time, and that is when the SAR works best.1

Acceleration

Intermediate

Because the Acceleration Factor impacts how closely SAR follows price movement, a higher step tightens stops but causes more flips.1

Discipline tool

Advanced

Because the stop only moves in the trend's direction, it stops you from loosening a stop-loss.1

Common mistakes

  1. Trading SAR in ranges

    Filter for trend first.

  2. Raising AF too high

    It causes constant flips.

  3. Ignoring gaps

    Price can jump past SAR.

  4. Reversing blindly

    Not every flip deserves a new trade.

Check your understanding

Test yourself before moving on. Each answer comes with an explanation.

Q1SAR dots are below price. This suggests…
Q2What happens to AF on each new extreme?

Key points to remember

  1. SAR means stop and reverse.
  2. Dots trail price like a stop.
  3. AF speeds the stop up over time.
  4. Works best in trends.
  5. Whipsaws in ranges.

Frequently asked questions

What are common settings?

A step of 0.02 and a maximum of 0.20.

Is SAR good in ranges?

No; it whipsaws.

Who created it?

J. Welles Wilder.

Further learning

Sources

This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.

  1. StockCharts ChartSchool. Parabolic SAR (opens in a new tab) Checked .
  2. TradingView. Parabolic SAR (SAR) – Help Center (opens in a new tab) Checked .

Read more elsewhere

Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.