Parabolic SAR — what it is and how to use it in trading
Definition
Parabolic SAR (Stop and Reverse) is an indicator that trails price with dots below it in an uptrend and above it in a downtrend, accelerating as the move continues.
How it works in the builder
The psar operand takes step (acceleration step, default 0.02) and max_step (acceleration cap, default 0.2) parameters. A flip of the dots from one side of price to the other signals a trend reversal.
What it looks like on the chart
Drawn directly on the price chart as individual dots — below the candles in an uptrend, above them in a downtrend; the flip is visually easy to spot.
Typical use
Often used as a trailing stop-loss level (hence "Stop and Reverse" in the name), or as a simple trend filter based on which side of price the dots currently sit.
Common pitfalls
In a ranging market Parabolic SAR flips frequently, generating many false trend-change signals — like most trend-following indicators, it works better in pronounced trending moves than in a flat range.
This block is available in the strategy builder
137 no-code blocks — build an entry condition with this term and test it on history
Historical results do not guarantee future ones. The service is an informational and analytical tool, not an individual investment recommendation; trades are not executed.