Parabolic SAR: a stop that moves with the trend

Parabolic SAR — 'stop and reverse' — plots a dot on each bar that sits either below price (read as an uptrend) or above it (a downtrend). As the trend continues, the dots accelerate toward price. When price finally touches them, the indicator flips to the other side and the acceleration resets.

It was designed as a trailing-stop mechanism rather than a directional forecast. The acceleration factor is the key behaviour: the longer a move runs, the tighter the dots close in, so a long trend eventually gets stopped out by a modest pullback.

Unlike almost every other indicator on this site, SAR has no middle state. The dots are always on one side of price, so it always reports either 'up' or 'down' with full conviction. There is no equivalent of an RSI sitting at 50 and saying nothing in particular.

That property makes it easy to read and easy to over-trust. In a sideways range SAR flips repeatedly, and each flip looks exactly as confident as a flip that comes at the start of a genuine multi-month trend.

SAR is at its worst in exactly the conditions that are most common: range-bound, low-conviction markets. It performs best when a trend is long, smooth, and uninterrupted, which is a minority of the time for most stocks.

Read it as one voice among several, and specifically as a voice that will always be shouting. That is why its weight here is deliberately small.