Trend Indicator for Binary Options Parabolic Sar
Parabolic SAR is one of the simplest indicators for binary options trading; it can be a useful addition to any strategy. The indicator was developed by Wells Wilder (already mentioned by me earlier as the creator of the RSI, ATR and ADX oscillators) in order to eliminate the effect of the lag of moving averages and other trend indicators.
Visually, the Parabolic SAR (Stop And Reverse) indicator is a point that goes one after another along the parabolas, which can either be above the chart or below it. SAR points below the chart are an uptrend, SAR points above the chart are a downtrend
When calculating Parabolic Sar parameters, in contrast to ordinary moving averages, such a parameter as acceleration is used. This parameter causes the parabolic points to approach the price chart with the growth of subsequent candles on an uptrend or a decrease in subsequent candles on a downtrend. At the moment when the price crosses the parabolic points, they change their location, showing us the possibility of a trend change.
From the above, an important conclusion follows that a parabolic is a trend indicator that works well only during trend periods. it provides only two possible paths of development: either growth or decline. In a flat, it can give a large number of false signals for binary options.
Parabolic is extremely popular in forex due to the fact that at any time you can close the position when changing the location of the indicator relative to the chart, i.e. at the time of the proposed change in trend. This property is also suitable for binary options (in the event that the broker gives you the opportunity to close the option in advance, while receiving an incomplete profit).
In the settings of the trend indicator for binary options - Parabolic Sar, you can change two parameters: step and maximum step. By default, these parameters are set in the author's version: step - 0.02, maximum step - 0.2. From my own experience I will say that I do not advise changing them, otherwise the interpretation of the parabolic will be significantly complicated.
The timeframe for using this indicator to trade binary options is recommended to be taken from one day to one hour. However, I worked with the Parabolic Sar indicator on a timeframe of 5 minutes, opening options 30 minutes ahead, and did not encounter any problems with its use in short-term transactions.
Trend Indicator Signals for Binary Options Parabolic SAR
1. Definition of trend reversal points:
- If the price crosses the Parabolic SAR from the bottom up, and new points form below the chart, this is a signal to buy a call option;
If the price crosses the Parabolic SAR from top to bottom, and new points form above the chart, this is a signal for binary options on put, respectively.
- Definition of a market trend
- If Parabolic SAR is below the chart, the trend is upward;
- If the Parabolic SAR is above the chart, the trend is down.
The trend indicator for binary options SAR can come in handy no matter what strategy you use, trending or counter-trending. The points do not clutter the chart, which allows you to follow the price action patterns, plus the SAR will serve as a kind of rear-view mirror to determine the trend or its reversal.
By the way, according to my observations, a parabolic most effectively works precisely in counter-trend strategies, together with oscillators that show the strength of the trend. For example, with the indicator of Demark or Stochastic. In trending strategies, he often simply duplicates other trend indicators, but this is just my personal opinion.
Free download of the Parabolic Sar indicator:
Strategy for binary options in which the Parabolic SAR indicator can be used:
- "Three screens of Elder."