Parabolic SAR

What it is

SAR stands for "stop and reverse", and this indicator also comes from Welles Wilder. The dots sit below price in an uptrend and above it in a downtrend, closing in at an increasing pace as the trend runs. When price reaches the dots, the direction flips.

How it's calculated

1. Next SAR = current SAR + AF × (extreme point − current SAR)
2. The extreme point is the trend's highest high (uptrend) or lowest low (downtrend).
3. The acceleration factor AF starts at 0.02 and rises by 0.02 with each new extreme, up to 0.2.

How traders read it

• The dots switching from below to above price, or back, signals a change of direction.
• Traders often use SAR as a trailing stop in trends.
• It works best in strong, steady trends.

Settings

The classic settings are a start of 0.02, a step of 0.02 and a maximum of 0.2. A larger step brings the dots in faster and exits sooner.

Where it misleads

• Parabolic SAR is always in the market and keeps flipping in ranges.
• It's better combined with a trend filter such as ADX or a moving average.

Its Pine Script on Vlevel

This is the script the chart runs. In the chart's indicators window you can open it, change it and save your own copy.

//@version=6
indicator("Parabolic SAR", shorttitle = "SAR", overlay = true)
start     = input.float(0.02, "Start", step = 0.01)
increment = input.float(0.02, "Increment", step = 0.01)
maximum   = input.float(0.2, "Max Value", step = 0.01)
plot(ta.sar(start, increment, maximum), "ParabolicSAR", style = plot.style_cross, color = #f1f5f4)