Parabolic SAR binary options’ indicator shows points where a market can switch from one trend to the opposite one. There is no complicacy in this indicator’s work. Its essence comes to the necessity to find the reversal point and buy an option. For example, if points are located above a price chart, the Put binary option has to be bought. If the points are drawn below a price chart, it is recommended to buy the Call option. The indicator can be also applied along with other auxiliary tools in order to receive more accurate signals.
The Parabolic SAR binary options’ indicator helps finding the reversal points of the main trend. When the current movement starts to weaken, the perspective of its reverse appears. This is the time to start trading in the opposite direction. The indicator’s name is based on the principle of how it is represented on a chart. It looks like a parabola.
The way this indicator is plotting by its essence reminds of the moving average. For this reason, showings of this auxiliary tool can be considered only within the long trends. If we consider the short-term periods only, a line can send many false signals. It is also pretty easy to conduct the visual rendering of this indicator. If a market grows, line’s points are shown below a price chart. If it falls, these points are plotting above a price.
Parabolic SAR: usage
Work with the Parabolic SAR binary options’ indicator is pretty simple. If a point appears below the price on the binary options’ chart, then it is possible that there will be the reverse upwards soon. If a point appears above a price chart, it is possible that the ascending movement will soon switch to the descending one. In the first case, if a point appears below a chart, it is needed to buy the Call option. In the second case, if a point appears above a chart, prepare to buy the Put option.
Considering settings of the Parabolic SAR binary options’ indicator, the 0.02 period is set by default. But you can change it if you want. At the same time, if the periods are smaller, a signal is sent earlier. Therefore, if you trade binary options using this tool, you can earn more profit. But if you set a smaller period, a generous amount of false signals appears.
If a trader chooses longer period, he will get an opportunity to minimize the amount of false signals. But, in this case, the Parabolic SAR binary options’ indicator will react to the price’s changes slower, and a trader may not be able to find the point for the binary option’s purchase.
This auxiliary tool can be applied during a day-trading, in other words, in order to buy the option with the short-term expiration. As the majority of other indicators, it can be combined, for example, with the moving average. Though the general concept of these auxiliary tools’ work is similar, they can complement each other pretty well.
For example, if the moving average shows that there will be a reverse of the ascending trend, in other words, if its line reverses on a chart and, at the same time, Parabolic’s line draws a point above a price chart, a good signal to buy the Put binary option appears. In the opposite situation, when a line of the moving average reverses from down to up, and the line of the Parabolic binary options’ indicator draws points below a price chart, then the opportunity to buy the Call option appears.