# How to use Parabolic SAR | What is this Indicator

Parabolic SAR
The Parabolic SAR (Stop and Reverse) is a popular technical analysis indicator developed by J. Welles Wilder. It’s designed to provide potential entry and exit points, and to signal the direction of a trend. The indicator is called “parabolic” because, when plotted on a chart, the dots representing the SAR form a parabolic shape.

Calculating the Parabolic SAR
The Parabolic SAR is calculated using the following formulas:

• Uptrend: SAR = Prior SAR + Prior AF(Prior EP – Prior SAR)
• Downtrend: SAR = Prior SAR – Prior AF(Prior SAR – Prior EP)

Where:

• SAR = Stop and Reverse
• AF = Acceleration Factor, which starts at 0.02 and increases by 0.02 each time a new extreme point (EP) is recorded, up to a maximum of 0.20.
• EP = Extreme Point, which is the highest high in an uptrend or the lowest low in a downtrend.

Interpreting the Parabolic SAR
The Parabolic SAR is plotted as a series of dots above or below the price bars. When the dots are below the price bars, this suggests an uptrend and is a signal to buy or hold. When the dots are above the price bars, this suggests a downtrend and is a signal to sell or short.

The Parabolic SAR is also used to set trailing stop losses. In an uptrend, the SAR value can be used as a stop loss level that moves up as the price rises. In a downtrend, the SAR value can be used as a stop loss level that moves down as the price falls.