Let’s talk about Pinocchio principle of binary options
Pinocchio Strategy (pin bar pattern) is very easy to use. It can be used by both professional and novice traders. Moreover, this system, in contrast to other binary options strategies can be applied without specific professional skills and knowledge of the intricacies of fundamental or technical analysis. Wherein, the strategy is so versatile that it can be used both for trading commodity futures and stocks, as well as for trading currency pairs.
Pinocchio strategy for binary options can be used on various types of graphs. This is one of the easiest strategies since it is based on simple work with a combination of candles (bars), which gives a basic understanding of the market without a deep delving into the essence of the processes.
Pinocchio’s strategy is quite an effective trading tool that is available to the trader.
However, to get started with such a system one should take enough time to determine the pin-bar on the graph. This is a difficult moment, because often similar shapes that are not signaling are formed at the market. That is why many novice investors “put a stamp” on this working procedure, calling it a blind-alley. Herewith, somehow heed is not taken to that part of the purchased contracts was acquired unreasonably. But if you take enough time to study the system, it can be a good stimulus for further profitable trading.
Pinocchio candlestick pattern is reversal, which means the market reversal happens in the opposite direction of the current trend. If the asset price is moving in a certain direction and had an upward or downward trend, after the formation of the long shadow of the candle – the nose – the market usually reverses in the opposite direction to the movement.
Pinocchio strategy for binary options is not new and has long been used successfully by both novices and experienced traders in their work. Of course, it is not “Salvage” button, but a reliable tool for earnings in the right hands. This strategy is suitable for any of the underlying assets and time graphs, but is especially good at currency pairs’ trade. It should be tracked at the extremes of the graph, and then it is really indicative.
What the pattern looks like and what conditions must be met when trading with this strategy:
- Trading model with Pinocchio strategy consists of three candles
- Average basic candle – “nose” – should have a small body, so opening and closing levels of the candle should be close to each other. The lower body of the candle, the stronger the signal for action.
- Another prerequisite for the middle candle: it must have a large shadow (tail), which will go far beyond the surrounding candles.
- The body of the candle – the nose – should be in the range of the previous candle.
- The body of an average candle should not be placed in the middle, but close to one of the candle’s ends.
For example, the value of a certain asset at a given time had an upward trend, that is, was rising up. Once you see that model began to take shape – a candle with a large tail up – analyze to make it fit the parameters listed above. Then you have to wait for the opening of the next candle. When it crosses the mark of the extremum (maximum or minimum) of a key candle, you can open an option in the opposite side of its tail.
The main tips for successful trading Pinocchio:
Pinocchio is always composed of three bars, and the more accurately coincide the opening and the closing of bars, the stronger the signal, i.e. closing of the first left bar matches with the opening of the second bar, and closing of the second bar is on the same level with the opening of the third one.
Middle bar must have a long “nose” of Pinocchio (bar shadow) and go beyond the two neighboring. Pinocchio’s nose should always be larger than the body of the bar.
Pinocchio signal can be either at the top of the graph, when the nose goes up, and at the bottom of the graph, respectively, when the nose is pulled down.
Purchase of a binary option should be carried out when the third bar crosses the shadow of the middle bar.
This model of the graph can be found at any time intervals, check the daily, hourly, minute graphs. If you don’t have enough trading experience and you can’t detect the trend accurately, I advise you to work first on the daily graphs and buy binary options with a strike deadline at the end of the day.
Pros of pinocchio graphical strategy:
- Versatility. It allows you to trade stocks, trade indices and currency pairs. It can be applied to various types of graphs.
- It can be used both by a professional and a novice trader.
- Pinocchio signal is quite widespread and the most frequent guest to currency pair graphs. It is not difficult to find and identify it.
Cons of graphical pinocchio strategy:
- It is necessary to thoroughly monitor the level of the opening and closing of the option and the shadow of the main bar.
- It is very important to be able to wait for the initial formation of the figure and its confirmation by the appearance of the third bar. The situation when inexperienced traders buy an option too early and then suffer significant losses, is fairly common.
- An important point when using this strategy is that at the very beginning of the work a trader should take enough time to learn to determine the pin-bar on the graph accurately. Any trader must accurately determine this moment, as a huge amount of formed shapes are not signaling. Defining pin-bar mistakenly, many traders lose their money.
That’s all for now. Got any questions? Just ask the expert!