What is Parabolic SAR?
Parabolic SAR (stop and reverse) plots a trailing dot below price in an uptrend and above price in a downtrend, and the dot flips sides when price crosses it.
How it works
Wilder introduced it. The dot moves toward price a little faster each bar that the trend makes a new extreme, controlled by an acceleration factor that starts at 0.02, steps up by 0.02 and is capped at 0.2 in the standard settings. A flip is read as a reversal and the dot is also used as a trailing stop.
What it can't tell you
In a sideways market price crosses the dot repeatedly, so a flip-following rule is stopped out again and again.
How Tickfloor uses it
Parabolic SAR direction is one of the ten inputs to Tickfloor's agreement score.
Does it work as a strategy?
Tickfloor backtested 1 rule that use Parabolic SAR, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use Parabolic SAR, and a historical diagnostic, not validation under Testing Standard v2.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is Parabolic SAR?
Parabolic SAR (stop and reverse) plots a trailing dot below price in an uptrend and above price in a downtrend, and the dot flips sides when price crosses it.
How does Parabolic SAR work?
Wilder introduced it. The dot moves toward price a little faster each bar that the trend makes a new extreme, controlled by an acceleration factor that starts at 0.02, steps up by 0.02 and is capped at 0.2 in the standard settings. A flip is read as a reversal and the dot is also used as a trailing stop.
Does Parabolic SAR work as a strategy?
Tickfloor backtested 1 rule that use Parabolic SAR, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use Parabolic SAR, and a historical diagnostic, not validation under Testing Standard v2.
What are the limits of Parabolic SAR?
In a sideways market price crosses the dot repeatedly, so a flip-following rule is stopped out again and again.
How does Tickfloor use Parabolic SAR?
Parabolic SAR direction is one of the ten inputs to Tickfloor's agreement score.