Parabolic SAR Trailing Stops and Acceleration Factor

Summary

This document explains a trailing stop based on Parabolic SAR logic. It tracks an extreme price point and updates the stop using an acceleration factor (AF). In an uptrend, the stop rises as price makes new highs; when the trend state changes, the stop logic reverses. The AF begins at a configurable value, increases when a new extreme is recorded, and is capped at a maximum. The provided defaults are 0.02 for the initial factor and increment, and 0.2 for the cap. The accompanying strategy source enters long while its trend flag is positive and issues a short entry when a new downtrend is detected.

The notes present trailing stops as a way to follow trends and protect accrued gains, while warning that sensitive settings can trigger on noise and exit before a trend resumes. They recommend testing parameter choices across markets and mention multi-level stops and other filters as possible extensions. The published settings describe a short BTC/USDT futures sample, but no performance results are given. The discussion is primarily about stop mechanics; it does not establish that the associated entry rules or parameter values are profitable.

Key ideas

• The stop level follows price extremes using a Parabolic SAR style calculation.
• The acceleration factor increases when a new extreme is reached, up to a configured maximum.
• Sensitive settings can cause exits on short-lived price noise, while slow settings may surrender more gains.
• The supplied strategy source uses its trend state to enter long positions and to signal short entries at new downtrends.
• The document gives no backtest performance evidence for the described settings.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.