Parabolic SAR: Acceleration and Reversals

Identify the stored state

A typical update moves the prior SAR toward an extreme point: new candidate = prior SAR + acceleration factor × (extreme point − prior SAR). Direction, prior SAR, the most extreme price in the current run and the acceleration factor are state variables. MetaQuotes documents Parabolic SAR’s recursive construction.

Implementations also apply rules for acceleration increases, maximum acceleration, price clamps and reversals. These rules matter as much as the basic equation. A spreadsheet containing only the final dot cannot explain every next output unless it preserves the earlier state and the relevant highs and lows.

Calculate an illustrative upward-state update

Assume previous SAR is 95, the extreme high is 105 and acceleration is 0.02. The raw next candidate is 95 + 0.02 × (105 − 95) = 95.20. If a later state has extreme high 108 and acceleration 0.04, using 95.20 as the prior SAR gives 95.20 + 0.04 × 12.80 = 95.712.

Those numbers describe the raw recursion before any price clamp or reversal check. A common implementation prevents an upward-state SAR from exceeding particular recent lows. If that constraint applies, the final plotted value can be lower than the raw candidate. The exact clamp sequence should be copied from the implementation being tested, not guessed from a chart.

When the reversal condition occurs, the algorithm changes direction and reinitializes relevant state. Simply drawing a continuation of the old upward curve does not reproduce the new downward sequence. Equality at the boundary, gaps and the order in which current-bar extremes are processed can affect the reversal timestamp.

Separate a plotted stop from an order

A dot at 95.712 is not necessarily a valid order price. If the instrument's increment is 0.25, an operational rule must choose a permitted level and account for whether rounding changes the intended protection. Even a valid stop price can execute elsewhere if the market gaps or available liquidity is insufficient.

The indicator does not automatically maintain a broker-side stop order. A chart, an alert, a trading algorithm and a broker instruction are different components. Verify which component actually submits or modifies an order, and confirm acceptance rather than assuming a moving line has changed account protection.

Review repeated reversals honestly

In a sideways series the state may flip repeatedly, producing a visually tidy set of alternating dots but an expensive sequence of hypothetical trades. Increasing acceleration changes sensitivity; it does not establish an improvement in risk-adjusted performance. Include spread, fees and delayed fills in any comparison.

Use price-grid validation before mapping a dot to an order, and compare Supertrend’s different state logic. A reproducible backtest should record the full SAR variant, warm-up and bar-timing convention so another reader can reconstruct the same state changes.