Forex glossary

Parabolic SAR (Stop And Reverse)

Wilder's Parabolic SAR plots points above or below price using the prior SAR, the trend extreme and an acceleration factor. Common settings use a 0.02 step and 0.20 maximum. Crossing the level changes the indicator's state; closing or reversing an actual position requires a separate order or program.

Illustrative example

How does it work in practice?

Assume prior SAR of 100, an extreme of 110 and acceleration of 0.02. The basic update gives 100.2; a practical implementation also applies prior-candle extreme constraints and a reversal rule.

A case to work through

A chart point without an order

Hypothetically, previous SAR=50, extreme=60 and acceleration=0.04; the account has no stop order.

  1. The basic update gives 50+0.04×(60−50)=50.4.
  2. The indicator plots a value; without a separate order or code it does not close the position.

What follows? Check active terminal orders separately from the chart.

Example boundary: Implementations apply additional constraints and reversal rules; fills can differ from the level.

A useful distinction

Parabolic SAR (Stop And Reverse) / Trading Plan

SAR calculates indicator levels; a trading plan decides whether and how they become order rules.

Check your understanding

Calculate a basic indicator step without equating it with an account stop.

SAR=80, extreme=100 and acceleration=0.02. What is the basic update?

Show the answer and explanation

80.4

80+0.02×20=80.4 before additional constraints.

Direction and strength tools

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Sources and documentation

The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.

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