what is parabolic sar

Parabolic SAR (Stop And Reverse) is a trend-following indicator, created by Welles Wilder, that plots a series of dots above or below price. When the dots are below price the trend is up; when they flip above, the indicator is signalling a reversal to a downtrend. The dots accelerate toward price the longer a trend runs, which makes the SAR function as a self-tightening trailing stop rather than an entry signal on its own.

how to use parabolic sar

The most reliable use is as a trailing stop and exit, not as a standalone buy-sell system: while you are long, the dot below price marks where you would step out, ratcheting up as the trend continues so it locks in gains. A flip of the dots from below to above price is the exit-and-reverse signal. Because it performs badly in sideways markets, most traders apply it only when a separate trend filter, such as ADX, confirms a trend is actually present.

what are the best parabolic sar settings

The standard settings are a step (acceleration factor) of 0.02 and a maximum of 0.20, which Wilder himself used. A larger step makes the dots tighten faster and flip sooner, catching reversals earlier but whipsawing more; a smaller step gives the trend more room at the cost of returning more profit before it exits. As always, the defaults are a starting point to test on your instrument and timeframe, not a rule — the settings do not manufacture an edge.

what is the main weakness of parabolic sar

Its fatal weakness is that it is always in the market — it is never flat, so in a sideways or choppy market it flips from long to short and back repeatedly, generating a string of losing whipsaws. It has no concept of "no trend"; it assumes one always exists and picks a side. That is why it should be paired with a trend filter and treated as a trailing-stop tool for trends, never as a signal to trade a range.

Parabolic SAR indicator: how to use it (and its weakness)

On a trending chart, Parabolic SAR is one of the most visually intuitive indicators there is: a trail of dots running just under a rising price, or just over a falling one, creeping closer as the move matures. Welles Wilder — who also gave us RSI and ADX — designed it as a way to ride a trend and know exactly where to get off.

How the dots move

Each session the SAR steps a little closer to price, and it accelerates the longer the trend runs, governed by an acceleration factor (the standard step is 0.02, rising to a maximum of 0.20). Early in a trend the dots sit well away, giving the move room; as the trend extends they close in, ratcheting the stop tighter and tighter until price finally touches one and the signal flips. That self-tightening is the whole idea — it lets a trend breathe early and protects profit late.

Check yourself

Parabolic SAR performs worst in which kind of market?

Simple bhasha mein

Dots jo trailing stop hain

Parabolic SAR (Stop And Reverse, Wilder ka) — dots jo price ke neeche (uptrend) ya upar (downtrend) chalte hain. Best use: entry signal nahi, trailing stop. Long ho toh neeche wala dot exit level hai, aur trend jitna chale utna paas aata jaata hai — profit lock. Dot flip = exit-and-reverse. Par ek badi kamzori: SAR hamesha market mein hota hai, kabhi flat nahi. Sideways market mein baar-baar flip = whipsaw pe whipsaw. Isliye ADX jaise trend filter ke saath use karo; range mein band kar do.

What to remember

Parabolic SAR plots dots that trail price — below in uptrends, above in downtrends.
A flip of the dots is a stop-and-reverse signal; it works best as a trailing stop.
It accelerates toward price as a trend runs, tightening the stop automatically.
It is always in the market, so it whipsaws badly in sideways ranges.
Pair it with a trend filter like ADX and use it only when a trend is present.

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Common questions

Short, direct answers to what people ask about this topic.

what is parabolic sar: Parabolic SAR (Stop And Reverse) is a trend-following indicator, created by Welles Wilder, that plots a series of dots above or below price. When the dots are below price the trend is up; when they flip above, the indicator is signalling a reversal to a downtrend. The dots accelerate toward price the longer a trend runs, which makes the SAR function as a self-tightening trailing stop rather than an entry signal on its own.
how to use parabolic sar: The most reliable use is as a trailing stop and exit, not as a standalone buy-sell system: while you are long, the dot below price marks where you would step out, ratcheting up as the trend continues so it locks in gains. A flip of the dots from below to above price is the exit-and-reverse signal. Because it performs badly in sideways markets, most traders apply it only when a separate trend filter, such as ADX, confirms a trend is actually present.
what are the best parabolic sar settings: The standard settings are a step (acceleration factor) of 0.02 and a maximum of 0.20, which Wilder himself used. A larger step makes the dots tighten faster and flip sooner, catching reversals earlier but whipsawing more; a smaller step gives the trend more room at the cost of returning more profit before it exits. As always, the defaults are a starting point to test on your instrument and timeframe, not a rule — the settings do not manufacture an edge.
what is the main weakness of parabolic sar: Its fatal weakness is that it is always in the market — it is never flat, so in a sideways or choppy market it flips from long to short and back repeatedly, generating a string of losing whipsaws. It has no concept of "no trend"; it assumes one always exists and picks a side. That is why it should be paired with a trend filter and treated as a trailing-stop tool for trends, never as a signal to trade a range.

Parabolic SAR: the stop-and-reverse dots

How the dots move

Common questions