Parabolic SAR — Stop and Reverse
Overview
Parabolic SAR (Stop and Reverse) plots dots above or below price to indicate trend direction and potential reversal points — it is one of the simplest trend-following indicators to use. Combine it with the ADX to filter out low-quality signals in ranging markets and improve your win rate. It also doubles as a dynamic trailing stop; read our stop-loss guide for best practices on protecting your capital. Explore more trend tools in our full indicator guide library.
How It Works
Parabolic SAR uses an acceleration factor (starting at 0.02, incrementing by 0.02 per new extreme, capped at 0.2). Dots below price = uptrend; dots above = downtrend. When price touches the dots, the trend reverses.
Key Signals
- Dots flipping from above to below price signals a new uptrend.
- Dots flipping from below to above signals a new downtrend.
- The dots can be used as a trailing stop-loss that automatically tightens.
- Combined with ADX, Parabolic SAR works best when ADX > 25 (strong trend).
Common Mistakes
- Using Parabolic SAR in sideways markets — it generates constant false reversals.
- Ignoring the acceleration factor settings — defaults work well for most markets.
- Using it as the sole entry signal without trend confirmation.
More Trend Indicators
WMA — Weighted Moving Average
The Weighted Moving Average assigns linearly increasing weight to more recent prices, making it more responsive than the <a href="/academy/indicators/simple-moving-average" class="text-primary hover:underline">SMA</a> while maintaining a straightforward calculation. WMA is popular among <a href="/market/forex" class="text-primary hover:underline">forex</a> traders who need faster trend signals without the complexity of exponential smoothing. Compare it with the <a href="/academy/indicators/exponential-moving-average" class="text-primary hover:underline">EMA</a> and other moving averages in our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> to choose the best fit for your strategy.
DEMA — Double Exponential Moving Average
DEMA reduces the inherent lag of the <a href="/academy/indicators/exponential-moving-average" class="text-primary hover:underline">EMA</a> by applying a double-smoothing technique, giving traders faster trend signals without excessive noise. It is widely used in <a href="/market/forex" class="text-primary hover:underline">forex</a> scalping and <a href="/market/crypto" class="text-primary hover:underline">crypto</a> swing trading, where speed of signal matters. Explore how DEMA compares with the <a href="/academy/indicators/triple-exponential-moving-average" class="text-primary hover:underline">TEMA</a> and other moving averages in our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a>.
Exponential Moving Average (EMA)
The Exponential Moving Average gives more weight to recent prices, making it more responsive to new information than the <a href="/academy/indicators/simple-moving-average" class="text-primary hover:underline">SMA</a> while still smoothing out noise. EMA crossovers are a cornerstone of many <a href="/strategies" class="text-primary hover:underline">trading strategies</a>, from scalping to <a href="/strategies/trading-styles/swing-trading" class="text-primary hover:underline">swing trading</a>, across every asset class. Use the EMA on a professional <a href="/tools/platforms/tradingview" class="text-primary hover:underline">charting platform</a> to fine-tune pullback entries and trend-following setups. Browse our full <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> to learn how the EMA integrates with momentum and volume tools.
TEMA — Triple Exponential Moving Average
TEMA pushes the lag reduction of <a href="/academy/indicators/double-exponential-moving-average" class="text-primary hover:underline">DEMA</a> even further by applying a triple-smoothing formula, making it one of the most responsive moving averages available. It excels in fast-paced <a href="/market/crypto" class="text-primary hover:underline">crypto</a> markets where every bar of lag can mean a missed entry. Review our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> to understand the full spectrum of moving averages from <a href="/academy/indicators/simple-moving-average" class="text-primary hover:underline">SMA</a> to TEMA.