Binary Option Strategy Using PSAR from BinaryOptionStrategy
Hello, This is Daniel Grady with BinaryOptionStrategy and today we're going to be talking about an often neglected indicator: PSAR. Parabolic Stop and Reverse got a bit of abad reputation when applied to forex, but it has a unique strength that makes it goodfor binary options. Most trading software include it as part ofthe standard configuration, and it's often labeled as Parabolic SAR. Let's start by showing you how it's supposedto work.
This is your typical chart which could beany asset, such as currencies, stock market, whatever. This strategy is pretty sociableand works good with pretty much everything. If we add a PSAR indicator, it will show upas dots above or bellow the candles. Each dot is tied with the candle that is aboveor bellow it forming a pair. The basic idea is that when the market isabove the dot, then it is expected to go up. If the market is below the dot, then we canexpect it to go down. Pretty simple, righté Now, if you look at the chart closely, youcan see that it's only showing short moves
in the market, which wouldn't be all thatuseful for a forex trader. But as a binary options trader, all we want to know is ifthe option will expire in the money. A short move is right down our alley. But, you'll also notice that the dots forma pattern, and this is how we can turn this indicator into a useful binary options strategy. What we are looking for are times when thedots are moving in the same direction as the indicator. In other words, if the dots areabove the market, showing that will go down, then we want to see a pattern where each dotis lower than the previous one.
That shows us that not only is the marketgoing down, but it's likely to keep going down for a while and we can buy a put. The same applies in reverse for a bullishmarket. In other words, we want to buy calls when each dot comes in above the previousone. To get the most of this strategy, you wantto track the market in a timeframe that's a third or as close to a third of the expirytime of your options. What this means is that if your options expireevery fifteen minutes, you want to track the market in a 5 minute chart. Or, if your optionsexpire every hour, you'd want to track the
market in a 20 minute chart. Sometimes 20minute charts are not available, so you should substitute with the closest timeframe, forexample, 15 mintues. Of course these moves don't last forever,and will eventually shift in the opposite direction. This is why when using this strategy,you want to get in on the market when it shifts direction and ride it as it goes in your favor. The ideal situation is to wait for the dotsto switch sides and wait for two or three dots to confirm the move, and then jump onthe market. This strategy has the additional advantageof being easy to combine with other strategies.
But we'll get into that in a later tutorial. And that's it for the Parabolic SAR for today.Don't forget to suscribe to get the latest info on the markets and more binary optionstrategy tutorials. Thanks for watching and happy trading!.