The Pin bar trading strategy (pin bar pattern) is very simple in its usage. It can be used by both professionals and beginners in trading. In addition, this system, unlike the other binary options’ strategies, can be applied without the professional skills and special knowledge in the fundamental analysis. At the same time, this strategy is so versatile that can be applied not only for indexes and stocks trading, but also for the Forex currency pairs trading.
Pin bar pattern formation on the chart
The Pin bar binary options’ strategy can be applied on the different types of charts. Those who prefer working with bars have to look for the model that has three bars. And those who prefer the Japanese candlesticks will look for the model with one candlestick. Closure of the left bar has to occur within the opening of the middle bar. Therefore, the middle bar has to close within the opening of the right bar. At the same time, the middle bar has to have the long enough shadow, which sufficiently extends beyond the right and left bars.
Before puzzling out how to use this strategy, it is necessary to understand what the middle pin bar is and how it has to look. Firstly, it is necessary to mention that the pin bar has the long shadow. Sometimes, the shadow is called the spike in the trading literature. So, the spike or the shadow has to be fairly long. At the same time, they are directed in the opposite to the current movement direction. It is necessary to note that the longer the spike is, the more chances of its strategy work off exist. The perfect variant is when the spike exceeds the bounds of greatly, and its body doesn’t exceeds the previous bar or candlestick bounds. In some cases, the Hammer’s body (and this the Hammer model for the Japanese candlesticks exactly) or the pin bar’s body can exceed the previous bounds. But in order to get the signal which is as clear as possible, it is better to wait until the appearance of the pin bar that won’t exceed the bounds. There is another one important remark. Hammer’s spike has to exceed its body length in several times.
How does the pin bar strategy for the binary options work?
Finally, after we have dealt with how this pattern looks on the chart, we can start considering recommendations for the positions’ opening. The binary option’s purchase is conducted when the last candlestick in combination is confirmed. If we consider the situation with the ascending trend, the third bar’s body has to exceed the bounds of the second one. In this case, we can state that the pattern has confirmed. In this situation, the Call binary option can be bought. And if we consider the descending trend, it is important that the bearish bar on the right from the pin bar crosses the candlestick’s body from down to up. It will indicate that the bearish trend will continue in the market, and the Put option can be bought.
It’s necessary to note that, despite this strategy is fairly simple, the beginners are recommended to consider the emerging in the market models carefully. It is very important to wait until the formation of such pattern and its confirmation in the form of the third bar. It frequently happens that the beginners in trading buy options before its due time and bear large losses. After this, they say that this binary options’ strategy doesn’t work. But, in sober fact, it is not true. They just don’t fulfill the complete conditions of this patterns’ formation and, for this reason, lose their money.