Parabolic SAR
A trailing stop-and-reverse indicator that plots dots which accelerate toward price as a move extends.
Formula
SAR = Prior SAR + Acceleration Factor x (Extreme Point - Prior SAR), with the factor rising by a step each time a new extreme is made
Unit
₹
In depth
The acceleration factor typically starts at 0.02, rises by 0.02 at each new extreme, and caps at 0.20, which makes the stop tighten faster the longer a move runs. This is its useful property as an exit rule and its weakness as an entry rule: it is always in the market, flipping from long to short and back, which produces constant whipsaws in range-bound conditions. Using it purely as a trailing stop while taking entries from elsewhere is the more defensible application. The dots are a calculated level, not a prediction of where price will go.
Worked example
Prior SAR ₹480, acceleration factor 0.04, extreme point ₹534. New SAR = 480 + 0.04 x (534 - 480) = 480 + 2.16 = ₹482.16. Each new high raises the factor and pulls the stop up faster.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Parabolic SAR” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.