An indicator as simple as a satellite dish. This may be one of the definitions of the Parabolic SAR according to its design, its purpose is to identify price strengths and trend reversals, and its excellence is optimized in stable or strongly trending markets, even more so when accompanied by other indicators.
There are many indicators in trading. Knowing them and, above all, knowing how they work and how to use them requires a lot of study. But don’t worry, you don’t need to know all the trading indicators, just the ones that best suit your strategies.
In this article, we’ll look at the Parabolic SAR on IQ Option and help you understand how it works and whether it’s worth using in your IQ Option trading operations.
Who was J. Welles Wilder?
This was another indicator created by J. Welles Wilder, a famous commodities trader and considered to be the father of technical analysis. Among the indicators he created are none other than: RSI, ART and Parabolic SAR. We’ve already talked about the RSI indicator, which you can check out here.
Technical analysis or graphical analysis is probably the most important in the binary options market, so studying this author will always be relevant to improving your knowledge and operational skills.
The indicators developed by Welles Wilder aim to anticipate future movements in the price of assets on the market, and are important for defining entry and exit points.
Since binary options have the particularity of trading puts and calls, we’ll go into a little more detail about the use of the Parabolic SAR in IQ Option.
What is Parabolic SAR?
The name of this indicator originated because according to its creator, whom we mentioned just above, he related its design to that of a satellite dish. The acronym SAR stands for “Stop and Reverse”.
On the chart, they behave like dots that follow the price and if they are positioned below, it means the price is in an uptrend and if it is positioned above, it means a downtrend.
The purpose of the Parabolic SAR on IQ Option is to try to predict trend or reversal signals so that you can anticipate them.
Another important reading you should make about this indicator is the distance of these dots from the price bars. If they are too close, it means that the strength of the movement is less intense, while a greater distance indicates greater strength in the price movement.
How to use Parabolic SAR on IQ Option?
Taking advantage of the previous paragraph, greater distances between the indicator and the candles on the chart will generally imply stronger movements, which can help your assertiveness when using Parabolic SAR on IQ Option.
Another important point is that this indicator is best suited to longer timeframes, so its effectiveness is lower for timeframes such as 1 and 5 minutes. Try to use it for longer time frames, such as 15 minutes.
In addition, you need to bear in mind that the assertiveness of the Parabolic SAR on IQ Option in isolation is not high. This doesn’t mean that the indicator is bad, but that it works best when combined with other indicators, such as the MACD, Stochastic Oscillator and simple moving averages.
How to set up Parabolic SAR on IQ Option?
To set up the Parabolic SAR on IQ Option, the procedures are quite simple, just like setting up the other indicators and tools.
To do this, simply click on “indicators” in the bottom left-hand corner of the trading screen. As this indicator is quite popular, you can find it in the “Popular” tab and then select it.
We recommend, at least at first, to follow the default settings of the Parabolic SAR in IQ Option, just by clicking on “Apply”. But if you feel comfortable configuring it, you can do so by clicking on “Configure and Apply”.
If you want to tinker with the settings, you can make it more or less sensitive by changing the indicator’s acceleration patterns. Greater acceleration will make the Parabolic SAR more sensitive, but you may get more false signals.
The opposite will give you greater reliability, but less sensitivity and entry opportunities. For this reason, we recommend using the default setting at least at the beginning and adjusting it gradually if you wish.
Advantages of using Parabolic SAR on IQ Option
The indicator’s main advantage is that, during strong trends and in stable markets. If you’re the type who likes to make a lot of trades, this is also a good indicator, as it tends to offer a lot of entry signals.
In addition to these factors, it tends to be assertive when indicating reversal signals, which can help you better understand and perceive any change in the behavior of the price of the asset in question.
Another important advantage, in our opinion, is that this indicator is easy to use and interpret. We therefore highly recommend its use by beginners, although it can also be used by more experienced traders.
Disadvantages of using Parabolic SAR on IQ Option
In more sideways markets, the effectiveness of the Parabolic SAR on IQ Option decreases, since the signals it offers are often not very clear as to the movement of the market, since the main purpose of this indicator is to predict stronger movements and reversals.
For this reason, it is always important to understand the market as a whole and whether using Parabolic SAR (or any other indicator) on IQ Option will be compatible with what the market is showing.
Another point to note, as we’ve already mentioned, is that this indicator can give false signals, especially if its configuration has a high acceleration rate.
Regardless of this, we recommend using it with at least one other indicator to increase your assertiveness in the market.
After reading this article, you can learn how to use the Parabolic SAR with a demo account on the IQ Option platform, and get to know the most interesting trading strategies.
