Pinbars are chart-patterns which are made up of a single candlestick and work well as part of a binary options strategy. The particular candlesticks that you’ll be looking for will alert you to a trend-reversal, which is why they can be used as an indicator for Call/Put trades. There are two primary types of pinbars, and several actual variations do exist. Not to worry though, as this strategy will tell you exactly what to look for prior to entering into a trade.
Inside the bearish reversal group (which is made up of pinbars that appear at the end of a bullish price trend and signal a bearish reversal), is the shooting star, doji, and inverted hammer. In the bullish reversal group (which consists of candlesticks that usher in the bullish reversal of an earlier bearish trend), are the hanging man, hammer, and dragonfly doji. The same as every pattern-based trading strategy, everything hinges on the accurate identification of the aforementioned candlesticks. Seasoned binary options traders will likely be able to spot these at a glance, but novice traders will want to take the time to learn what they look like.
These types of candlestick patterns are rarely regarded as being strong-enough trading signals on their own. Once you learn how to correctly identify them, you will still need to use additional indicators for support. The good news is that the use of the supplemental indicators is easy, and they’re generally made available for free online. One such tool is the automatic pivot point calculator. A sound method of adding validation to a pinbar entry is to combine a candlestick pattern which suggests an upcoming bearish reversal, with a solid resistance level for the presented asset price. In the same way, combining a pinbar showing a bullish reversal with a solid support level will make the entry signal even stronger.
Another indicator that can be used is the stochastic oscillator, which will point out likely locations of trend reversal as well. Whenever the oscillator lines cross at <25, an overselling is taking place, which indicates a potential bullish reversal. When this information is combined with an existing support level and existing bullish pinbar at the level of support, a bullish reversal is very likely to soon take place. The same can be said if the stochastic oscillator crosses at >75 and overbuying is taking place. Add in the existence of a resistance level and bearish pinbar, and again you have a strong signal.
To trade on a bullish reversal you would monitor the price of the asset, particularly whenever a downtrend has been taking place for some time. Watch for one of the bullish pinbars to appear and once it does, have your pivot point calculator draw three support and three resistance levels (jointly with its daily pivot) and then look to see if the pinbar is at a level of support. If so, it’s time to trade, as use of the stochastic oscillator would be optional. Nevertheless, if you use the stochastic too and observe the lines crossing and indicating an oversold situation, that action will be additional validation.
Although this particular strategy is for use with a Call/Put trade, it can be modified slightly to be applied to Touch and No Touch trade types. Again, keep in mind that the pinbar on its own is not enough to provide solid validation for trade entry, but when paired with additional indicators, it can provide a clear view of the expected upcoming price movement. For the beginner level trader, this binary options strategy may seem a bit complex, but with just a bit of practice (in a demo platform, if possible) it should become quite easy to use.
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