Pinocchio Binary Options Trading Strategy
This strategy is worked on a specific type of candle. A Pinocchio bar (aka Pin bar) had a long wick (nose) and a small body. The wick part becomes longer as a price goes in one direction and then retraces. Based on the length of the wick, the probability of the price going in the opposite direction becomes higher, proving that the original trend is false (the lie).
When you look at the longer wick, it means that the sellers (the bears or Put traders) took the price down the lowest point of the wick but the buyers (bulls or Call traders) entered the market and the price then increased. This shows on the candle as a small body and a long lower wick. This often means that the price will continue rising as this type of candle shows rejection of the previous trend. When looking at a bullish Pinocchio bar, the opposite of the above applies.
How does it work?
The simplest form of this strategy would be buying a Put on the up wick and buying a Call on the down wick, but to get better results you need to complicate the strategy a little. Combine this strategy with technical indicators and price action will give you a little more security on your signals. Add in resistance and support lines, trend lines, oversold and overbought levels, confluence and divergence and you are likely to get the right results. You would need to start by being able to identify the Pinocchio type candle and then start the homework to look at trends, ranges and so forth to see when to enter.
Tips and tricks with this strategy
This is not the simplest strategy to use as a beginner as you cannot simply trade when you see the Pin bar and if you are not experienced in gauging the market you may not be successful with your trade. There are a number of factors that can affect the trend and it is better to have clear confirmation after noting the Pinocchio bar before entering a trade. This strategy does however work well in a trending market if you only trade with the trend and in ranging markets. It is an extremely accurate and reliable strategy as the Pin bar clearly shows the behaviour of the market participants. This bar also allows you to identify false breaks in a trend and allows you to avoid the inevitable trend change indicted by the Pinocchio bar.
This strategy has a proven 70% success level with experienced traders and a double reward to risk ratio. To ensure a good trade it is recommended to watch for a number of other factors to give a good signal and not to just trade based on the Pin bar alone. This strategy is better when used for forex trading but can also be used successfully for binary option trading with some minor adaptions and the use of a few extra indicators.
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