The rate will then quicken to a point where the SAR converges towards the price. To prevent it from getting too large, a maximum value for the acceleration factor is normally set to 0.20. The traders can set these numbers depending on their trading style and the instruments being traded. Generally, it is preferable in stocks trading to set the acceleration factor to 0.01, so that it is not too sensitive to local decreases. For commodity or currency trading, the preferred value is 0.02. The SAR is calculated in this manner for each new period. However, two special cases will modify the SAR value: If the next period's SAR value is inside (or beyond) the current period or the previous period's price range, the SAR must be set to the closest price bound. For example, if in an upward trend, the new SAR value is calculated and if it results to be more than today's or yesterday's lowest price, it must be set equal to that lower boundary. If the next period's SAR value is inside (or beyond) the next period's price range, a new trend direction is then signaled. The SAR must then switch sides. Upon a trend switch, the first SAR value for this new trend is set to the last EP recorded on the prior trend, EP is then reset accordingly to this period's maximum, and the acceleration factor is reset to its initial value of 0.02. Statistical Results The parabolic SAR showed results at a 95% confidence level in a study of 17 years of data. References Chart overlays Technical indicators