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Hi:
Here's a site that has an explanation of the Parabolic SAR which is much the same as the one in Wilder's book.
http://www.incrediblecharts.com/technical/parabolic_sar_construction.htm
Their explanation is below.
I never tried to program it in MetaStock because I've assumed that MetaStock has it correct, and it sure looked that way when I was playing with it. It is like so many other formulas that are always in the market, it works great in trending markets but you pay a high price in choppy markets.
Jay
The "formula"
Parabolic SAR
Construction
There are a few basic concepts that need to be addressed before we can explain how Parabolic SAR is calculated:
Extreme PointThis is the highest price recorded (to date) during a long trade or the lowest price recorded (to date) during a short trade.
Significant PointThe SP is the highest price reached in a long trade or the lowest price reached in a short trade. It is equal to the extreme point when a trade is closed.
Acceleration FactorThe Acceleration Factor starts at 2% for a new trade and increases by 2% on each day that a new extreme point is reached. The maximum acceleration factor is 20%. No further increases are made after this figure has been reached..
SAR Calculation
On day 1 of a new trade (the day that the trade is entered), the Parabolic SAR is taken as the significant point from the previous trade.
If the trade is Long the SP will be the extreme Low reached in the previous trade.
If the trade is Short then the SP will be the extreme High reached in the previous trade.
To calculate Parabolic SAR for the following day:
Take the difference between the extreme point and the SAR (on day 1) and multiply by the acceleration factor.
If the trade is Long, add the result to the SAR on day 1.
If the trade is Short, subtract the result from the SAR on day 1.
There is one exception:
Parabolic SAR is never moved within the range of the current or previous day (highest High to lowest Low over the 2 days).
If this occurs in a long trade, use the lowest Low over the 2 days as SAR for the following day.
If short, use the highest High over the 2 days as SAR for the following day.
Repeat the Parabolic SAR calculation for each subsequent day, adjusting the Acceleration Factor whenever a new extreme point is recorded.
The trade is reversed when price equals the Parabolic SAR for the day.
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