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Parabolic SAR explained, and how to write it as a condition

Trend · 4 min read

SAR stands for "stop and reverse", and that is the whole idea: a dot that trails price, closes in on it a little more every bar, and the moment price touches it, jumps to the other side. It always has an opinion about direction, which is both its appeal and its problem.

Parabolic SAR dots trailing the candles, green below price while bullish and red above while bearish, with the bar where price crosses back above the dots highlighted
Illustrative candles. The dots curve in towards price as a move extends; the flip is where price crosses them.

What it measures

While price is rising, the SAR sits below it and moves up each bar by a fraction of the gap between itself and the highest high the move has reached. The fraction starts small and grows every time a new high is set, which is why the dots trace a curve that bends towards price — the parabola in the name. If a bar's low touches the dot, the SAR flips: it jumps to the highest high of the move just ended, sits above price, and starts curving down towards it. The reverse holds in a fall.

So it is never neutral. There is always a dot, it is always above or below price, and that side is the indicator's direction. In a trend the dots stay on one side for a long stretch; in a range they flip every few bars.

The two settings

  1. Step. How much the acceleration grows each time price makes a new extreme. The default is 0.02. A larger step curves in faster, flips sooner, and flips more often.
  2. Max step. The ceiling the acceleration stops at — 0.2 by default. It limits how tightly the dots can hug an extended move.

Neither is a length in bars, which makes this indicator unusual: there is no lookback window, only the move in progress and how long it has been going.

Writing it as a condition

These are the comparisons SixOne8 offers, in the builder's own words. Price is always the subject.

  1. Price above. The bar closed above the dot — the SAR is below price, the bullish side. A state.
  2. Price below. The bar closed below the dot. The bearish side. A state.
  3. Price crosses above / crosses below. The bar of the flip itself. True only on that bar — the moment this indicator supplies.

Parabolic SAR(0.02, 0.2) on 1h  ·  price crosses above

Read it as a sentence: on the 1-hour chart, price has just closed above the SAR, which has flipped from above the candles to below them. That is what the scanner evaluates at each hourly close.

Where it fits

Because it flips constantly in a sideways market, the SAR on its own is one of the most frequent triggers in the catalogue, and most of its flips in a range reverse within a few bars. The strategies that use it well put something slower in front: ADX greater than 25 on the same timeframe, or price above a long moving average on a higher one, so the flip only counts when the larger picture already agrees. Its other role is as a trailing level — the dot is a natural place to put a stop, which is what the "stop" in the name originally meant — and that is a question for the backtest rather than for the entry.

Before you trust it

Run an entry check. It will tell you whether, on the market you care about, the moments this condition fired moved any differently from a random moment over the history tested. That is a fact about the past on that market, and it is the only kind of fact a test here produces.

Next

ADX explained The usual gate in front of a SAR flip: is a trend in force at all? Supertrend explained A trailing line with the same flip, set a fixed number of ATRs from price.