Parabolic SAR is a trend-following indicator that can be used to identify potential trends and reversals in the financial market. This indicator alone is a very powerful indicator and can give you great results however, if you use this indicator in conjunction with the trend indicator it becomes even more powerful. In this article, I am going to combine the Parabolic SAR with RSI or Relative Strength Index and how you can use this combination to make big bucks and increase your profitability ratio.
How to use Parabolic SAR and RSI indicator on IQ Option?
In order, to use Parabolic SAR on IQ Option. Firstly, open your IQ Option chart. In case, you are not a member of IQ Option fill out the form below.
Once, you have signed up. Open the chart and click the indicator button at the bottom left of the page. Now, search for the Parabolic SAR indicator.
Similarly, add the Relative Strength Index on the IQ Option chart.
Now, customise the indicator as per requirements. once you are done click apply.
Key Points about Parabolic SAR & Relative Strength Index
- Parabolic SAR stands for Parabolic stop and reverse is a technical indicator that helps traders identify the direction of trend using a series of dots plotted around the price.
- The Parabolic SAR indicator is a trend-following indicator that uses dots on a price chart to indicate potential trend reversals.
- This indicator uses a mathematical formula to plot dots on the price chart. The dots are placed either above or below the price depending on the direction of the trend.
- When the dots are below the price, it indicates a bullish trend, and when they are above the price, it indicates a bearish trend.
- RSI or Relative Strength Index is a momentum oscillator that was developed by one of the most famous technical analysts J. Welles Wilder.
- The RSI indicator measures both the speed and the rate of change in the price movement within the market.
- The RSI indicator is considered to signal an overbought condition when the line is above 70. similarly, when the RSI indicator line is below 30 it signals an oversold condition.
- When the RSI indicator line is at an overbought level you can consider placing a sell trade similarly, when the RSI indicator line is at an oversold level you can consider placing a buy trade.
How to trade with the combination of Parabolic SAR and RSI indicator on IQ Option
Identifying trends and placing trades using Parabolic SAR and RSI indicator is very easy. You just need to find out the current trend using Parabolic SAR and confirm the trend using the Relative Strength Index indicator.
When Parabolic SAR dots are below the price, It signals a bullish trend. and here we can consider placing a buy trade. Now, you need to confirm the trend using the Relative Strength Index when the RSI line is below or near line 30 it confirms a strong bullish trend and here we can place a buy trade accordingly.
Similarly, When the Parabolic SAR dots are above the price, It signals a bearish trend. and here we can consider placing a sell trade. Now, you need to confirm the trend using the Relative Strength Index when the RSI line is above or near line 70 it confirms a strong bearish trend and here we can place a sell trade accordingly.
Summary
Parabolic SAR and Relative Strength Index indicator is one of the powerful and popular trading indicators via this indicator you can identify the possible upcoming trends and reversals. These indicators use a mathematical formula and it is displayed as a series of dots and moving average line to help us analyse the security. The dots in the Parabolic SAR is plotted around the price either at the top or bottom of the price. when we see the dots at the top of the price it signals an upcoming bullish trend similarly, when the dots are plotted at the bottom of the price. It signals an upcoming bearish Trend. once, you have spotted a trend using Parabolic SAR you need to confirm the trend using Relative Strength Index.
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