The most frequently occurring signal that appears on the chart is the pin-bar, so why not make profit out of it? This signal refers to a type of candlestick pattern and is a graphical Price Action model.
Price Action is a whole trading philosophy based on clean charts, which use the price itself as an indicator along with all the shapes that it forms over time. Thus, the pin-bar pattern is part of the story being played out by the price movement. Let’s see now what kind of story it tells.
The pin bar is a price bar with a small body and two shadows: a small and a longer one. The “long nose” of the pin-bar stands out from the rest of the candlestick and the more it is visible out of the other bars, the stronger the signal. Traders call such a pin-bar “Pinocchio”, and you have probably guessed why. This chart based strategy is easy to use and is suitable for both beginners and professional traders. You can even use if you do not have any advanced knowledge in the field of fundamental analysis or technical analysis. This strategy is appropriate when trading currency pairs, as well as indices and stocks. As a beginner, you will enjoy finding signals and see how the price moves based on them.
The Binary Options Trading Strategy “Pinocchio” is mainly used in chart types such as bars and Japanese candlesticks. In the case of the bar chart, it can be seen that the graphic pattern is formed in three lines (bars): “left eye”, “right eye” and the longest line, substantially extending beyond the other two – the “nose”. The most ideal figure to see is the pin-bar formed along the trend as it will be better to look for a longer line and a shorter body.
The pin bar is classified as a reversal pattern of the price. After closing of the pin bar candlestick, in 87% of cases the price moves in the opposite direction. The nose of “Pinocchio” is always facing in the opposite direction of the forthcoming movement. That is, as described above, the price quote moves to the opposite direction.
Thus, if the nose of the pin bar is pointing up, then the price will start moving downwards. Respectively, if the nose of “Pinocchio” goes down, the price moves upwards.
However, if one of the following situations is apparent, the pin bar should be ignored:
- The long “nose” is absent;
- The tails of candlesticks have equal or nearly equal length.
The occurrence of the pattern will have even greater strength and weight, if:
- The pattern appears at the level of support or resistance level;
- The pattern confirms the information of a technical indicator of overbought – oversold asset.
In these 2 situations described above, the strength of the pattern signal is almost 100%.
How to use the pin bar when trading binary options?
The pin bar chart pattern can indicate a very good moment to enter the market. So, after the close of the “Pinocchio” candlestick, it is necessary to open a position with classic options: if the longer tail of the pin bar is above the chart, you should buy the Put option, if it is below, you should buy Call option.
Other suitable options
Also, given the fact that after the pin-bar the price reverses, right after closing of the “Pinocchio” candlestick, you can trade using Range or One-Touch options.
Thus, to trade on pin-bar we need to choose classical CALL and PUT binary options, RANGE options, as well as ONE-TOUCH options, with which you can make greater profits.
If for the identification of “Pinocchio” pattern you have used the M30 chart, the Expiry Time of the contract should be set for at least 3 hours. To put it simply, the Expiry Time should surpass the timeframe value by six times.
Trading on chart patterns has always brought me and other traders quite a good profit. Maybe this is the reason why traders who learned to trade on a clean chart are generally considered “market gurus”. The profit from signals occurs in about 70% of the situations, which is a high figure. Thus, 4 out of 5 trades will be closed with a profit.
It is very important to manage your risk, especially at the beginning of your trading path. For this strategy you can start with 5% of the deposit amount.