The Parabolic SAR (Stop and Reverse) places dots above or below price to indicate the current trend direction and potential trailing stop levels.
How it works
SAR accelerates toward price over time. Parameters control how quickly the dots catch up:
- Start — Initial acceleration factor (default 0.02)
- Increment — Step increase on each new extreme (default 0.02)
- Maximum — Cap on acceleration (default 0.2)
When price crosses the SAR dots, the indicator flips to the other side of price, suggesting a trend reversal.
Formula
On an uptrend, SAR rises toward price:
SAR_t = SAR_{t−1} + AF × (EP − SAR_{t−1})
EP = extreme high since the uptrend started. AF (acceleration factor) starts at start (default 0.02), increases by increment (0.02) on each new high, capped at maximum (0.2). When price crosses SAR, AF resets and SAR flips to the other side; the downtrend formula mirrors with the extreme low.
How traders use SAR
- Dots below price — Uptrend / bullish bias
- Dots above price — Downtrend / bearish bias
- Trailing stop — Some traders move stops to SAR levels in trending markets
SAR performs poorly in choppy, sideways markets because flips generate frequent whipsaws.
In dogabot
The Parabolic SAR rule emits:
- Buy when price is above SAR
- Sell when price is below SAR
Example
In an uptrend on BTC/USDT 1h, SAR dots sit below price at $95,800 while close is $96,400. The Parabolic SAR rule reads that as buy. After a sharp drop, dots flipping above price would lean sell.