› Parabolic SAR and Awesome Oscillator Trading Strategy - How It Works

Parabolic SAR and Awesome Oscillator Trading Strategy - How It Works

Binary options trading has two crucial steps in the market analysis before making the trading decision - finding an entry point and calculating chances for a trend continuation. Short-term trading approach is more popular in the binary options market as it increases the profitability at the end of the day. The best market performance is reached when prices go in the same direction for a while, showing a stable and continuous performance. That’s the hardest part of the analysis as most of the financial instruments are vulnerable to wave-type of fluctuations, changing the price tendency several times. So one of the key targets for any binary options trader is to find periods when prices move in a stable manner on short-term timeframes. The main technical parameter, in this case, is the price momentum as it changes before the price, pointing to further direction.

What is Parabolic SAR with Awesome Oscillator?

Parabolic SAR and Awesome binary options trading strategy was designed to search for exactly same periods. It has several technical indicators with the different mathematical background which helps a trader to analyse current momentum from different points of view. At the same time, this strategy’s best performance is achieved on short-term timeframes such as 30-minutes and 15-minutes, which are the most popular expiration periods for binary options. Regarding the financial instruments, EUR/USD and USD/CHF currency pairs are preferable for Parabolic SAR and Awesome trading technique, as they are the most technically correct due to the high trading volume, lower volatility and the absence of sharp whipsaws and sudden reversals.
Awesome Oscillator Formula is compared two moving averages, one short-term and one long-term. Comparing two different time periods is pretty common for a number of technical indicators.

 Binary Options Parabolic SAR Strategy
Source: YouTube

How to use Parabolic SAR with Awesome?

First technical indicator is Parabolic SAR here. Its dots are usually placed below the current price during an uptrend and above the chart when a downtrend is more likely. Parabolic SAR compares close prices during a given period, pointing to a more probable price direction in the nearest candlestick. It also shows reversal points when the dots jump below (bullish reversal) or above (bearish) the price. However, this trading strategy is based on by-trend approach and those moments are not considered as a trading signal. The only analysis that we have to make with Parabolic SAR is just to assess the current trend.

Second technical indicator is Awesome Oscillator. It works as a confirmation tool, however, it’s importance cannot be underestimated. The reason is that Awesome oscillator shows the market momentum with its histogram being above (uptrend) or below (downtrend) zero level. Colours of bars also matter as sometimes it happens that bullish momentum is getting exhausted during an uptrend, signalling a possible consolidation period or even reversal likelihood. Both options are not acceptable for continuous trading on binary options market as traders are looking for a stable price action to maximize the profit. In that case, Awesome oscillator changes the colour of its bars from green to red (uptrend, bearish threat) or from red to green (downtrend, bullish threat), even if they are above or below the zero level, respectively. And again, those signals are not considered as the best trading signal for this strategy. Moreover, traders should stop buying options in the same direction once that happens. We’re looking for continuation signals here, so Awesome oscillator should keep the colour of its bars during the trading process.

If you like this strategy, you might also be interested in this Fibo and Stochastic Oscillator
Third technical tool is a 5-bars exponential moving average. If both indicators described above signal a trend continuation but the price bounces against the main tendency, crossing the EMA5, a divergence occurs, pointing to a perfect entry point on the candlestick close. Once the price crosses EMA5 from above, it’s time to get ready for buying call options while put options should be bought with the opposite case, when the price crosses EMA5 from the downside. Traders should keep buying the same options until Parabolic SAR dots jump above the price (call options) or below the chart (put options). The cycle has to be stopped also if Awesome oscillator changes the colour of its bars from green to red (call options) or from red to green (put options).

Example - How that Works

An example below shows the Parabolic SAR indicator and Awesome in action with two trading cycles on EUR/USD 30-minutes timeframe. As we can see from the chart, the strategy gives more than 90% efficiency.

Parabolic SAR and Awesome Oscillator Trading Strategy - How It Works

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