What does SAR stand for?

SAR stands for 'Stop and Reverse.' It is designed to always be in the market, though many use it simply as a trailing stop.

When does Parabolic SAR work best?

It is highly effective in trending markets. In sideways or ranging markets, it produces many false signals (whipsaws).

How do you use it as a stop loss?

In a long trade, you move your stop loss to the current SAR dot each time a new candle closes.

What happens when price hits a dot?

When the price touches a dot, the indicator flips to the other side of the price, suggesting a trend reversal.

Education · Indicators

Parabolic SAR: The trailing stop specialist.

The Parabolic SAR places dots on your chart to show the path of least resistance. It's a favorite for traders who struggle with knowing when to exit.

How the dots work.

If the dots are below the price, the trend is up. If the dots are above the price, the trend is down.

The distance between the price and the dots narrows as a trend accelerates, essentially 'chasing' the price to lock in profits.

Trailing your stops.

Use the dots as a dynamic stop loss level.
Only take signals in the direction of a higher timeframe trend.
Avoid using it when the ADX is below 20 (sideways market).
Pair it with a moving average for trend confirmation.

The acceleration factor.

The indicator includes an 'Acceleration Factor' that increases as the trend continues. This makes the SAR more sensitive to price changes the longer a trend lasts.

FAQ

Common questions.

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ADX Indicator

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