Technical indicators have become indispensable assistants for work on the financial markets when Internet trading appeared. These instruments allow traders to automatically calculate complex formulas that form the basis for analysing charts, and visually indicate the most likely outcome of further events.
However, most of these advisers are often late. So, it turns out that the trader enters the market not at the beginning of the movement, but already at its end. This sometimes leads to losing trades.
But Wilder developed the ATR and ADX instruments, as well as the Parabolic SAR, to keep such a destructive factor to a minimum.
Thanks to the parameter (acceleration), this indicator eliminates the delay and allows the trader to react in time to the incoming signal. User needs to select Parabolic SAR from the list of standard instruments and set on chart with asset to use in the terminal Pocket Option.
Form and settings of indicator
Parabolic refers to trend indicators, so it is located near the price chart. Visually, it forms a line with dots below or above the price chart.
- If the indicator is located above the candles, it is considered that there is a downward trend in the market.
- If the points are under them, then the trend is up.
It is also important to take into account the fact that the instrument is absolutely ineffective during flat and can give a lot of false signals.
The only parameter in Pocket Option terminal for the indicator is acceleration step. To edit the settings, trader needs to click on corresponding icon, as in figure below.
However, most traders, based on their own experience, don’t recommend changing this setting (0.02). Otherwise, the instrument can significantly distort the overall picture and give a lot of false signals.
Timeframes from H1 to D1 are considered to be suitable for working with Parabolic SAR. The instrument works more efficiently at these intervals, as market noise is eliminated.
How to trade with Parabolic on electronic contracts?
One of basic signals that emanate from adviser is direction of general trend. As mentioned earlier, it is believed that the trend is upward, if the candles are above the points, and downward, if below them.
However, many traders use Parabolic and to enter the trade directly. The principle is as follows:
- Call-option needs to be bought when candle has broken the indicator upward direction, and the next point has formed below it.
- Put-option needs to be bought when the candle has broken the indicator in downward, and the next point of instrument is formed above price.
Expiration time should not exceed the formation time of 2 candles.
Parabolic indicator is very easy to use in trading electronic contracts and therefore it is popular with novice traders and is used in many strategies.