Support and resistance level are considered to be most vital element when it comes to financial instrument trading. There are many professional options traders in the world making tons of money simply by trading the key support and resistance level of different currency pairs in the market. Professional options traders use the parabolic SAR indicator to trade the important support and resistance level in the market with the great level of accuracy. The use of Parabolic SAR indicators remains within its trend reversal indication. Trained professional use this indicators reading as a confirmation signal to trade the options market.
Let’s see how the professional traders use the parabolic SAR indicator in their options trading strategy
Drawing the key support and resistance level is the most important task while using this strategy. Professional traders use the most significant highs and lows to draw the support and resistance level on the chart. In the above figure, price respected the red horizontal many times since these lines have been drawn using the significant high and lows in the pair. When the price hit the key support level professional options traders wait patiently for the bullish confirmation in the parabolic SAR indicator. In the above figure, the indicators printed 5 consecutive dots below the candlestick which is clearly a bullish signal for the pair. Expert option traders then make sure that the price is very close to the support level before they execute their call option. The purple color shaded candle in the chart is the place where the call option trade was executed by the professional options traders after 5 consecutive bullish signals in the parabolic SAR indicator.
Put option technique is pretty much similar to call option. Trained professional make sure that the price is trading very close to the key resistance level. Once the price hit the key resistance level traders wait patiently for 5 consecutive bearish dots in the parabolic SAR indicators. When the parabolic SAR dot forms above the candlestick then it is considered to be a bearish dot. Put option trade was executed in the market in the purple shaded region since the price was close enough to the resistance level. However, if the price is far away from the support or resistance level the parabolic SAR signal is ignored by expert option traders. For instance, no trade was taken in the above figure since the price was far away from the support zone even though there was 5 consecutive bullish dot in the chart.