Parabolic SAR: dots that chase the price

Parabolic SAR looks like a trail of tiny footsteps under the candles. Every day it gets a bit closer to the price, and the longer the trend lasts, the bigger its steps. As soon as the price catches it, the dots jump to the other side – like Professor Wick stepping on a rake.

How it is computed#

SAR stands for stop and reverse. Parabolic SAR draws dots below the price in a rise and above it in a fall. Every candle the dot moves closer to the trend's extreme (the highest high in a rise, the lowest low in a fall):

new dot = dot + AF × (extreme − dot)

AF is the acceleration factor. It starts at 0.02 and grows by 0.02 with every new extreme of the trend – up to a maximum of 0.2. At the start of a trend the dot covers 2% of the remaining distance, after ten new highs 20%. That is why the dots approach the price along a curve – hence "parabolic".

The flip#

When the price crosses a dot, the trend is over according to SAR: the dots jump to the other side, start from the last extreme and AF goes back to 0.02. That is how SAR works as a moving stop – much like a trailing stop that follows the price.

Strong in a trend, weak in a chop#

In a clear trend SAR holds a trade for a long time and tightens the stop faster than a person would by hand. In a market without a trend, though, the price crosses the dots back and forth, and every flip is a new signal – mostly a false one. Between June and mid-August 2024 SAR flipped nine times while the price swung between 49,000 and 72,000 without a clear direction.

On Binance#

Original mode → indicator icon → Main Indicator → SAR. You set the starting factor (Start, default 0.02), the maximum (Maximum, default 0.2) and the colour of the dots:

Higher factors pull the dots in faster – more flips, more false signals. Lower ones slow them down.

Common myths#

• "A SAR flip is a signal to trade." In a sideways market it is mostly noise.
• "The dots are a support level." They are points computed by a formula, not a place where buyers stand.
• "A higher maximum AF = a better SAR." A faster SAR just flips more often.