The pin bar also known as the Pinocchio is very popular among traders. It is called the Pinocchio because it lies about the market trend/direction. But just like Pinocchio, its long nose exposes the lie.
Pinocchio binary options strategy does not require much professional skills and technical knowledge. It can be used in Forex trading and in commodity and stocks as well. In this article we will understand Pinocchio binary options strategy for Call and Put options trading. Pinocchio strategy for binary options can be used with various charts types including bar charts and candles. The bar charts will consist of three bars and Japanese candle chart consists of three candles.
Traders enter and leave the market on the basis of support and resistance levels. The Pinocchio pattern breaks through levels giving false hope to traders in the wrong trend direction. But as the pin closes back within support and resistance levels, prices move in the other direction.
Since there are three bars/candles in a Pinocchio pattern, the bar on the left should end at the origin of the bar in the middle such that the middle bar is closed at the opening of the right bar. Also, the middle bar has a very long shadow; enough to extend beyond the left and right bars.
Pinocchio pattern is located in the middle and it has a distinctive long shadow. This long shadow is sometimes termed as spike. It is directed in a direction opposite than the current motion. The spike or shade as you can call it is known for its length; the longer the spike, the more efficient the Pinocchio strategy will be.
The right and left side of the pattern account for Pinocchio’s eyes. The position of nose and eyes is set in a special way. The ideal method will be the one in which the spike goes beyond the previous bar and the body does not go beyond it. Although the body can sometimes extend the previous bar or candle, but an ideal case will better. Another important thing is that the spike must exceed the length of the body by several times.
Now that we know how to identify Pinocchio patterns, we can go on to trade positions with it. You can carry a binary options trade through Pinocchio pattern if there is confirmation of the last candle from the combination. If the trend is rising, the body of the third candle or bar has to move beyond the body of the second one. Only then will the pattern be confirmed. Now that there is confirmation of the bullish market trend, you can buy a Call binary option.
In case the trend is moving downwards, the bar on the right of the pattern crosses the body of the candle from top down. This is indication of bearish trend where you can buy a Put binary option.
If the trend is not confirmed, it is better to delay your entry.
The key is to identify the Pinocchio pattern after which it will be easier for you to make Call or Put decisions. Experts suggest that for Pinocchio pattern trading, you should open an account with a regular binary broker who offers demo trading.