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Parabolic SAR

Wilder's Stop And Reverse: a trail of dots chasing the trend with acceleration, below price in uptrends and above in downtrends. When price touches it, the trail flips to the other side.

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The Parabolic SAR (Stop And Reverse), another J. Welles Wilder tool (1978), was born from a practical problem: in a running trend, where do you keep the stop, day after day, without letting emotions drive? Wilder's answer is a trail of dots that chases price while accelerating: it starts far away, closes in on every bar, and when price touches it — the flip — it jumps to the other side and starts over.

In plain terms — A sheepdog following the flock: it keeps its distance at first, then edges closer as the flock advances. When the flock turns back and meets the dog, the dog crosses to the other side and the direction of the march is considered changed.

How it works

On every bar the SAR moves toward price by a fraction of its distance from the trend's extreme:

SAR(tomorrow) = SAR(today) + AF × (trend extreme − SAR(today))

The AF (acceleration factor) starts at 0.02 and grows by 0.02 with every new extreme, up to a cap of 0.20: the more new highs (or lows) the trend grinds out, the faster the stop accelerates. The resulting parabola gives the tool its name.

Configuration Reading
Dots below the bars Trend considered bullish — the SAR is the stop
Dots above the bars Trend considered bearish
Flip Price touched the SAR: stop hit, side inverted

How to read the chart — Price with the SAR dot trail: green below price, red above, computed with Wilder's real algorithm (0.02 → 0.20). Interactive — the highlighted points show the two flips and the sideways-market trap.

INDICATOR · TREND Parabolic SAR — the stop that trails the trend Dots = Stop And Reverse level · AF 0.02 (+0.02 up to 0.20) CYCLEPEDIA DIAGRAM — EMICICLO PARABOLIC SAR (0.02 → 0.20) dots below = uptrend dots above = downtrend flip flip FLIPS IN THE PERIOD 2 BARS WITH LONG BIAS 42 of 59 Born as a trailing stop: using it alone as a system is a different job
The trail accelerates as it closes in on price; on touch the flip occurs and the trail restarts from the opposite side.
Hover or tap the highlighted points

Reading it in practice

  1. Mechanical trailing stop — the use it was born for: in a clean trend, the SAR is an objective exit level that updates itself and never backs off. The modern alternative with the same logic but adjustable tolerance: the Supertrend.
  2. Visual bias definition — dots below = long side only; dots above = short side only. As a directional hygiene rule it is simple and honest.
  3. The flip is not an automatic entry — it signals that the previous trend's stop was hit. Treating it as an entry signal in the opposite direction (Wilder's literal "stop and reverse") assumes a market that always reverses decisively — a rare condition.

Limits and traps

Warning — In a sideways market the SAR is a flip machine: price touches the trail from both sides repeatedly, and every flip is a small stop paid. Wilder himself prescribed it for trending markets only — his own ADX filter exists precisely for this.

  • The fixed AF knows nothing about volatility: in nervous markets the SAR closes in on price too fast (the ATR-based Supertrend fixes exactly this).
  • The 0.02/0.20 parameters are the historical tuning: raising them tightens the trail, giving back less profit but multiplying premature exits.
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