GlossaryIntermediate
Parabolic SAR
A trend-following indicator plotting dots that trail price and accelerate over time, commonly used as a trailing stop-loss reference.
Parabolic SAR ("Stop and Reverse"), developed by J. Welles Wilder, plots a series of dots above or below price that trail the current trend, with the acceleration factor increasing the longer the trend continues, causing the dots to move closer to price over time.
When price crosses to the other side of the dots, the indicator flips — the dots switch from one side of price to the other — which is commonly read as a potential trend reversal signal, and the indicator is also widely used directly as a trailing stop-loss reference. See Kaavon's dedicated Parabolic SAR article for the full calculation.
Examples
- Parabolic SAR's dots accelerate closer to price the longer a trend continues, tightening a potential trailing stop as the trend matures.
- A Parabolic SAR flip — the dots switching from below price to above it — is commonly read as a signal the trend has reversed.