Binary options pin bar strategy
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.
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.
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.
Nevertheless, if you use the stochastic too and observe the lines crossing and indicating an oversold situation, that action will be additional validation. In this case we have a sign of a possible bearish reversal. Many times, especially in a high volatility period we have so many candles like this with small body and big wick but the reversal never come. So, I recommend this strategy in ranging markets and near important levels like supports and resistances, whole numbers, Fibonacci retracement etc.
Why have we this big wick? There is this big wick because the price hit an important level which rejected the price strongly. Personally, I am waiting for the first red or green candle after the reversal as confirmation because many times the price is trying to hit again these important levels after the rejection.
Look at this chart. The red horizontal line is our resistance. In the first blue box as you can easily see we have a pin bar. This is a potential put.
Small body, big wick. We have a reversal and now notice the pin bars near the chinkou the green line of Ichimoku Kinko Hyo. As I said in my article about Ichimoku the chinkou can act as a support or a resistance. When the price hit the chinkou and we have pin bars there are potentials calls.
I can see two ITM calls here.