Parabolic SAR
Dots that follow price — and tell you when to get out
Definition
The Parabolic SAR (Stop and Reverse) is a trend-following indicator that places dots above or below price to show potential stop-loss levels and trend direction. Dots below price indicate an uptrend; dots above price indicate a downtrend. When price crosses the SAR dots, it signals a potential trend reversal. The indicator is especially useful for trailing stop placement and identifying when a trend may be exhausted.
Example
During a strong SPX uptrend, Parabolic SAR dots appear below the candlesticks, accelerating upward. A trend trader uses these dots as their trailing stop: if SPX closes below the SAR dot, they exit the long position. When SAR flips from below to above price, the indicator signals a potential reversal from uptrend to downtrend.
Related Terms
Frequently Asked Question
What is the Parabolic SAR?
The Parabolic SAR places dots above (downtrend) or below (uptrend) price. When price crosses the dots, the trend may be reversing. Traders use SAR dots as trailing stop levels to lock in profits.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.