The formulas used are different if the SAR is rising on an uptrend (below price) versus falling on a downtrend (above price).
Rising SAR = Prior SAR + Prior AF (Prior HP – Prior SAR)
Falling SAR = Prior SAR – Prior AF (Prior SAR – Prior LP)
AF stands for acceleration factor, which has a default of 0.02 and increases by 0.02 each time a new high price is achieved in the current trend. This has a maximum of 0.20.
HP stands for high point, which is the highest high in a current uptrend. Similarly, LP stands for low point, which is the lowest low in a current downtrend.
Thankfully, you will not need to calculate the parabolic SAR for each period, as our online trading platform, Next Generation, automatically calculates the parabolic SAR algorithm in just a few clicks when applied to a trading chart.