ParaSAR Binary Options Strategy

ParaSAR Binary Options Strategy

Submitted by adil on Wed, 02/12/2014 - 11:38

Traders use many different strategies to configure their daily trade accurately and some of these strategies are really exciting and beneficial that goes in the favor of the employ. One such strategy is ParaSAR which includes only one trading chart but combines three different indicators. This particular strategy is supported by a momentum and two moving average indicators and is based on the Parabolic SAR Indicator. Actually, this strategy determines the momentum and direction which an asset later follows.   

The Trade Types:

This binary options trading strategy is specifically designed for the put and call trade contracts. Experts are still testing it in order to determine whether it can adapt to other binary options trading types or not.

The Rules for this Strategy:

Although, it is a very effective strategy yet it has a very major limitation that is it cannot be used on any chart other than a 4 hours one. Similarly, you have to remember another very important thing while employing this strategy. You should wait for all signal candles to close before placing the trade at the opening of the next candle.

The Indicators Used:

ParaSAR is the combination of different trading indictors which are given as under.

• 13-day simple moving average
• 200-day simple moving average
• Parabolic Stop and Reverse (SAR) indicator
• MACD Histogram

How to Use this Strategy for Put Trade?

There are many conditions a trader has to fulfill before employing this strategy to a put trade. Some of these requirements are mentioned below.

• Price action candles should always be present under the 200 SMA.
• MACD Histogram has to change its color from blue to red. You can also use the histogram if it is already red.

The 13 simple moving average should reject the upside move and the Parabolic SAR Indicator must appear above the price candle (that is sell signal for Parabolic SAR). The following figure will clarify the situation.

How to Use this Indictor for Call Trade?

Just like a put trade, there are many conditions a trader has to fulfill to use ParaSAR indicator for a call trade. Most of these conditions are the complete opposite of requirements for a put trade:

• Price action candles should always be located above the 200 SMA.
• The Parabolic SAR Indicator must display the buying signal at the same time when the candlestick bounces of the 13 simple moving average.
• In this case, the MACD will change its color from red to blue. However, you can use ParaSAR if MACD is already blue. Have a look at the following figure.

Setting Expiry Times:

As ParaSAR trade uses 4 hours chart, it is imperative for a trader to allow price action to occur for at least 4 to 6 candlesticks so that it may get enough time to touch the profit line. Therefore, the expiry time for this particular trade is usually between 16-24 hours but it is always safe to wait for 24 hours. In this regard, it is advisable to apply Early Closure Function to take a portion of the allowed profit if trade gets profitable before 24 hours.