An indicator that uses a single trailing “stop line” to show whether the price is in a rising or a falling stretch, and when it flipped.
- Weapon tier
- Advanced
- Slots used
- On chart 1/6
- Created by
- J. Welles Wilder Jr. · 1978
Concept
Parabolic SAR (Stop And Reverse) is a line that follows the price from below or above. In a rising stretch it climbs up beneath the candles; in a falling stretch it comes down above them.
When the price touches this line, the stretch flips and the line jumps to the other side. So it is read as “line below the candles = rising, above = falling”, and the candle where it jumps is seen as a reversal signal. As in the game, rising stretches are drawn in the candles’ up color and falling stretches in the down color.
- Parabolic SAR
Charts by TradingView Lightweight Charts™
80 candles with volume and the SAR line in the price area (up color in rising stretches, down color in falling ones). During the falling stretch in the earlier part, the line comes down above the candles, and at candle 60 (yellow vertical line) it jumps below them. Candles 60 to 80 (shaded) are the rising stretch that follows. Keyboard: ←/→ to move, +/− to zoom, 0 to see the whole chart.
Throughout the shaded stretch, the line follows from below, slowly at first and faster later on. The rise was not large. The earlier part of the chart also has a rising stretch where the line had jumped below the candles; after the peak, as the price fell, it flipped back above them only some time later. Reversal signals always come a little late. Drag the chart sideways with a finger or the mouse to move it, and pinch with two fingers to zoom in. With a keyboard, click the chart, then use ←/→ to move and +/− to zoom.
How it is calculated
When a stretch begins, SAR starts from the previous stretch’s “extreme point” (the highest high so far in a rise, the lowest low in a fall).
For each candle, SAR = previous SAR + acceleration factor × (extreme point − previous SAR). In other words, it closes part of the remaining distance to the extreme point. In a rising stretch it is not allowed above the lows of the previous two candles, and in a falling stretch not below their highs.
The acceleration factor starts at 0.02, grows by 0.02 every time the price makes a new extreme (a new high or low), and stops at 0.2. That is why the line catches up faster the longer a rise lasts.
When the low drops below SAR in a rising stretch (or the high rises above SAR in a falling stretch), the stretch flips: SAR jumps to the previous extreme point and the acceleration factor returns to 0.02.
Parameters
| What it sets | Name in the game | Default | Range |
|---|---|---|---|
| Starting acceleration factor | start | 0.02 | 0.01 – 0.1 |
| Increase in the acceleration factor at each new extreme | step | 0.02 | 0.01 – 0.1 |
| Maximum acceleration factor | max | 0.2 | 0.1 – 0.5 |
Trading ideas
Following reversals: a common use is to buy when the line jumps from above the candles to below them, and sell when it jumps from below to above. The chart on this page shows a flip upward.
Trailing stop: after buying, traders use the SAR below the candles as the stop-loss level and raise it as the line climbs.
Common traps
- In a sideways market the line keeps flipping at short intervals, and buying and selling at every flip piles up losses.
- As the acceleration factor grows, the line hugs the price closely and flips easily on a small pullback.
- The chart on this page was chosen as a scene where the price rose after the flip. It does not always go that way.
In the game
- “Parabolic SAR” is a “Advanced” weapon and uses 1 “On chart” line (limit 6).
- Together with the two Simple Moving Average lines in the starting setup (2 lines), it uses 3 lines, leaving 3 free.
- It is a single line, but rising and falling stretches have different colors, and it is broken where it flips.
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- 2. Trends and sideways moves
- 1. Reading a single candle