Pinocchio strategy (pin bar pattern) is very simple in usage. It can be used both by professional and novice traders. In addition, this system, in contrast to many other binary options strategies, can be applied without specific professional skills and knowledge of the intricacies of fundamental analysis. Herewith, the strategy is so all-purpose, that it can be used for either commodity stocks and futures trading or currency pairs trading.
Binary strategy Pinocchio can be attached on different types of charts. Traders more comfortable with bars should search for a model that contains three consecutive parts. Traders preferring Japanese candles should look for a model consisting of only one candle. When the left bar closes, it should occur within the confines of the central element opening, thus the central bar must close when the right candle is opening.
But then again, the central bar is to have a way long shadow greatly extending the left and right bars. For the purpose to research the situation in the market, many traders prefer to use Japanese candle graph, which is also very well suited for determining Pinocchio trading strategy. To operate with all of these elements, a live graph that allows the market analysis through a variety of elements is well suited.
Before you start seeing the essence of the strategy, it is necessary to understand the definition of pin-bar and its appearance in details on the chart. The pin-bar is situated right in the midst. Initially, a trader should notice that the pin-bar has such attribute as a long shadow. Sometimes in the literature on trade this shadow can be called a spike. So, a spike or a shade should be long enough. Hence, they stretch oppositely from the current movement. It should be noted: the chance that the strategy works out is greater when the spike is longer. The left eye of Pinocchio is located on the left from the pin-bar, while the nose and the eyes locate on one line.
After we discussed the appearance of the pattern on the chart, a trader can go straight to the opening of trading positions guideline. The purchase of the option is realized with the last candle in combination. In the situation when there is a rising trend, the third bar pattern needs to exceed the bounds of the second pattern. Therefore, in this case the pattern is confirmed. In this situation, you purchase a Call option. If it is a downward trend, it is important for bearish bar on the right of the pin-candle to cross the body downwards. It suggests the market to continue the bearish trend, so you can buy a Put option.
It’s important, that despite simplicity of the strategy, the novices are recommended to study the models forming on the market carefully. It is extremely important to be able to wait for such figure to form and then confirm as a third bar. Novices often buy the options too soon, thus incurring big losses. Afterwards, they claim that the strategy Pinocchio for binary trading is not effective. But they mistake the opinion. They simply do not comply with the conditions of this figure formation fully and, thus, lose their capital.
Strategy Pinocchio is an utterly effective trading instrument available to any trader. However, to start working with this system, a trader should take enough time to determine where the pin bar on the chart is. This moment is quite difficult, because resembling figures, that are not really signaling, are often formed on the market. That is the reason for many beginning investors to “hang a stamp” on this strategy, calling it a failure. Somehow, they just do not focus on the part of the purchased contracts that was unreasonable. But when you take enough time to study the strategy, it can become a good start for your further profitable trading.
That’s all for now. Got any questions? Just ask the expert!