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
Find the extreme point
Track the extreme point (EP): the highest high of an uptrend or the lowest low of a downtrend.2
Set the acceleration factor
Apply the acceleration factor (the “step”), which controls how quickly the SAR closes in on price.1
Update each bar
New SAR = prior SAR + AF × (EP − prior SAR).
Raise AF on new extremes
Increase AF by the step each time a new EP is made, up to a maximum.
Trail the stop
Let the stop keep rising for as long as the uptrend lasts.1
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 raisedA hypothetical uptrend: prior SAR 50.00, EP 55.00, AF 0.02.
| AF × (EP − SAR) | 0.10 |
| New SAR | 50.10 |
SAR follows prices like a trailing stop, edging up toward price.1
Example 2 — Reversal
Flip to shortA hypothetical stock with SAR at 48.30 drops to 48.00.
| Price | 48.00 |
| SAR | 48.30 |
Price broke below SAR, so the parabola moves above price for a bearish trend.2
Example 3 — Choppy range
WhipsawA hypothetical pair flips SAR side 6 times in 10 days.
| Flips | 6 |
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
| Aspect | Parabolic SAR | ATR-based stop |
|---|---|---|
| Speeds up over time | Yes, via AF | No |
| Based on | Extreme points | Volatility |
| Always in market | Yes, stop and reverse | No |
| Weak in ranges | Yes | Less 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
Trading SAR in ranges
Filter for trend first.
Raising AF too high
It causes constant flips.
Ignoring gaps
Price can jump past SAR.
Reversing blindly
Not every flip deserves a new trade.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- SAR means stop and reverse.
- Dots trail price like a stop.
- AF speeds the stop up over time.
- Works best in trends.
- Whipsaws in ranges.
Frequently asked questions
What are common settings?
Is SAR good in ranges?
Who created it?
Further learning
- Trailing Stop
The main use of SAR.
- Average True Range
Another Wilder tool for stops.
- Trend Following
Strategies SAR fits.
- Stop Loss
Basics of exits.
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.
- StockCharts ChartSchool. Parabolic SAR (opens in a new tab) Checked .
- TradingView. Parabolic SAR (SAR) – Help Center (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Parabolic SAR (opens in a new tab)
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.