Parabolic SAR
Trend
Stop And Reverse (Welles Wilder): a series of dots below or above the price that acts as a trailing stop-loss and flips sides on a reversal.
Construction & calculation
- As long as the trend is up, the dots sit below the price and creep closer each day.
- The acceleration factor (AF) starts at 0.02 and rises by 0.02 each time a new extreme is set, up to a maximum of 0.20.
- When the price touches the SAR, the system flips: the dots jump to the other side and the trend is assumed reversed.
SAR(tomorrow) = SAR(today) + AF x (EP - SAR(today))
EP = extreme point of the current trend, AF = 0.02 -> 0.20
Interpretation
- Dots below the price = hold the long position; dots above the price = short or cash.
- The SAR is most useful as a trailing stop: it never moves backward, only along with the trend.
- The steeper the trend, the faster the dots approach — the system automatically protects profit.
How the signal works in this scanner
Buy signal (green)The SAR's trend direction flips from down to up within the last 3 bars (the dots move from above to below the price).
Sell signal (red)The trend direction flips from up to down.
Watch-outs & pitfalls
- In a sideways market the PSAR is downright poor: it flips constantly and generates loss after loss.
- Wilder designed the SAR explicitly as an exit system, not an entry system. Combine with the ADX to know whether there even is a trend.