Parabolic SAR Trading: Trend Following & Stop Placement
Parabolic SAR provides built-in stop levels that follow price in trends. Learn to use SAR flips for entries and dots for trailing stops with automatic adjustment.
- Dots below price = bullish, above = bearish. Flip = stop-and-reverse entry signal.
- Use dots as trailing stop—price closes beyond dot = exit. Acceleration factor tightens stop in trends.
- Thrive displays PSAR with flip alerts and trailing stop levels.
Explore PSAR Signals
Click through Parabolic SAR concepts:
PSAR dots move from above candles to below. Trend changing from bearish to bullish. Entry signal for long positions. Stop-and-reverse point.
Dot Position
Dots flip from above to below price
Enter long when dots flip below. Use dots as trailing stop, exit if price closes below dot. Works best in trending markets. In ranges, many false signals.
What Is Parabolic SAR?
Parabolic SAR is a trend-following stop indicator. SAR = Stop And Reverse. It places dots above or below price to show trend direction and provide stop levels. When price crosses the dots, trend has reversed.
The "parabolic" refers to the acceleration factor—as a trend extends, the dots curve closer to price, creating a parabolic shape. This tightens your stop as trends mature.
PSAR Analysis
Thrive displays Parabolic SAR with automatic flip alerts and stop levels.
PSAR Signals
Bullish Flip
Dots move from above to below price. Trend changing to bullish. Enter long, use dots as trailing stop. Stay long until next flip.
Bearish Flip
Dots move from below to above price. Trend changing to bearish. Exit longs, enter short. Use dots as trailing stop for shorts.
Trailing Stop
In a trend, dots trail price. As trend extends, dots get closer (acceleration). Exit when price closes beyond dot. Objective exit point.
| Signal | Dots | Meaning | Action |
|---|---|---|---|
| Bullish Flip | Move below | Trend up | Enter long |
| Bearish Flip | Move above | Trend down | Enter short |
| Trailing | Following | In trend | Use as stop |
| Tight Dots | Close to price | Late trend | Exit soon |
Using PSAR as Trailing Stop
The primary use of PSAR is trailing stops. Enter on flip, then use dot level as your stop. As trend continues, dots follow—your stop tightens automatically.
- Removes emotion from stop management
- Automatic adjustment to trend conditions
- Tightens in extended trends (acceleration)
- Clear exit point when violated
Auto Trailing Stops
Thrive calculates PSAR levels for automatic trailing stop management.
Common Mistakes
- Using in ranges: PSAR whipsaws in ranges. Use trend filter (ADX).
- Trading every flip: Filter flips by trend direction. Don't short in uptrend.
- Ignoring acceleration: Tight dots = late in trend. Manage expectations.
- No confirmation: PSAR alone gives many signals. Combine with price action.
Frequently Asked Questions
What is Parabolic SAR?
Stop And Reverse indicator showing dots above or below price. Dots below = uptrend, dots above = downtrend. Flip = trend change and stop-reverse point.
How do I read PSAR dots?
Dots below candles = bullish (price above SAR). Dots above candles = bearish (price below SAR). When dots flip side = trend reversal signal.
How do I use PSAR for entries?
Enter long when dots flip below price. Enter short when dots flip above. This is the "stop-and-reverse" concept—exit and reverse at flip.
What is the acceleration factor?
PSAR has acceleration factor (AF) that increases as trend extends. Dots get closer to price in extended trends. Default AF = 0.02, max = 0.2.
Can PSAR be used as trailing stop?
Yes, primary use. In long position, use dot level as trailing stop. If price closes below dot, exit. Removes emotion from stop management.
What are PSAR's limitations?
Whipsaws in ranging markets—many false signals. Works best in trending markets. Filter with trend indicator or use in direction of higher TF trend.
What PSAR settings should I use?
Default: AF = 0.02, max = 0.2, step = 0.02. Higher AF = tighter stops but more signals. Lower = looser but misses fast reversals. Test for your style.
Does PSAR work for crypto?
Yes, especially for trend following in crypto's volatile markets. Filter ranging periods using ADX or only trade in clear trend direction.