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Parabolic SAR Indicator

The Parabolic SAR (Parabolic Stop and Reverse) is a directional indicator that is especially suited to binary options traders. It was developed by the famous technician J Welles Wilder Jr. to find points of potential reversals in the market.

It uses a concept of decay similar to that of time decay in options – that an existing trend should continue at a parabolic rate and not stagnate. If the position cannot be relied upon to continue to generate profits at an acceptable rate over time, it should be liquidated.

The signal generates a series of ‘dots’ for each point in time. These dots are placed either above or below the asset price. If the dot is above, then it is a bearish signal; the opposite is true for below. The distance of the first dot on a ‘switch’ is indicative of the strength of the signal – the further away from the current price, the better. As time goes on, the dots will catch up to the current price – at which point the dots will switch side, and it is time to liquidate and/or flip your position.

The chart below (1H EURUSD for the first week of November 2013) speaks for itself:

Parabolic SAR MethodAs you can see, the accuracy in trend detection and momentum reversals is exceptional.

This indicator is particularly suited for active binary traders because there is always a signal available; there is never any waiting time for the next signal to arrive.

In addition, it is easy to interpret and gives a simple ‘up/down’ recommendation at every instance – once again, this is exactly what binary traders need.

Here is a summary of the benefits of our Ichimoku Signal:

  1. Highly accurate trend and reversal detection.
  2. Signals are always available – the indicator always has an idea of which way the market is going.
  3. Applicable to all assets.
  4. Applicable to all timeframes.
  5. Easily applied take profit and stop loss rules.

The Parabolic SAR is the brainchild of one of the greatest technicians ever. Now take his creation and apply it to binary options – the results are sure to be very profitable indeed!

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