What it measures

Wilder's parabolic stop-and-reverse is a trailing stop that tightens as a trend ages. It starts far from price, accelerates toward it each time price makes a new extreme, and when price touches the stop the position reverses. The dots trace a parabola, hence the name. It is always in the market, long or short.

The calculation

SAR tomorrow = SAR today + AF × (EP − SAR today)

EP is the extreme point of the current trend (the highest high in an uptrend); AF is the acceleration factor, which starts at 0.02, rises by 0.02 each time a new EP is set, and is capped at 0.2. When price crosses the SAR, the trend reverses, the SAR resets to the prior EP and AF goes back to its start.

Inputs and defaults

  • Start: 0.02.
  • Increment: 0.02.
  • Maximum: 0.2.

How it is read

Dots below price mean long, dots above mean short; the dot is the stop. Because it reverses rather than exits, most strategies use it only as a trailing stop or a direction filter and take entries from something else.

Where it fails

Wilder designed it for markets that trend, and said so: in a range it reverses every few bars and loses on each. The acceleration means a long, steady trend gets stopped out on a routine pullback once the dots have caught up. It has no concept of "no position", so a rule that uses it alone is always exposed.

How the desk reads it

A SAR-based rule is read as a trend rule with a built-in exit that tightens with age, and judged on its reversals in the sideways months. Because it is always in the market, its drawdown in a range is the number to look at first.

In the desk's screen

Of the 614 screened strategies in the library, 5 (0.8%) use this indicator somewhere in their logic.

3 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.