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This is the Parabolic SAR from Wilder's book. He does not give a formula, only work sheets and this explanation.
RULES
PARABOLIC TIME/PRICE SYSTEM
ENTRY:
A position is entered when a price penetrates the SAR.
STOP AND REVERSE (SAR);
A. For the first day of entry, the SAR is the previous S!P (Significant Point).
1. If entered Long the S!P is the lowest price reached while in the previous Short trade.
2. If entered Short, the SIP is the highest price reached while in the previous Long trade.
B. For the second day and thereafter, the SAR is calculated as follows:
1. If Long:
a. Find the difference between the highest price made while in the trade and the SAR for to-
day. Multiply the difference by the AF and add the result to the SAR today to obtain the SAR
for tomorrow.
b. Use .02 for the first AF and increase its value by .02 on every day that a new high for the
trade is made. If a new high is not made, continue to use the AF as last increased. DO NOT
INCREASE THE AF ABOVE .20.
2. If Short:
a. Find the difference between the lowest price made while in the trade and the SAR for today.
Multiply the difference by the AF and subtract the result from the SAR today to obtain the
SAR for tomorrow.
b. Use .02 for the first AF and increase its value by .02 on every day that a new low for the
trade is made. If a new low is not made, continue to use the AF as last increased DO NOT
INCREASE THE AF ABOVE .20.
C. Never move the SAR into the previous day's range or today's range.
1. If Long, never move the SAR for tomorrow above the previous day's low or today's low. If the
SAR is calculated to be above the previous day's low or today's low, then use the lower low
between today and the previous day as the new SAR. Make the next day's calculations based
upon this SAR.
2. If Short, never move the SAR for tomorrow below the previous day's high or today's high. If the
SAR is calculated to be below the previous day's high or today's high, then use the higher high
between today and the previous day as the new SAR. Make the next day's calculations based
upon this SAR.
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