Technical and fundamental analysis is considered the basis for successful trading in binary options. But novice trading news trading is not recommended because of the volatility, technical analysis indicators may be delayed. And here comes graphical analysis.
A binary options pin bar is a graphical model of a reversal trend, which is a candlestick formation, indicating a glut in the market and a near reversal. Pronounced signs of a pin bar:
- The small body of the candle in comparison with the previous ones. This suggests that the price has found an equilibrium position (the opening price is almost equal to the closing price) and will soon change direction. In other words, the peak value of the trend with a short candlestick will mean that the bulls are not ready to pay more and fix positions;
- long shadow on one side. The length of the shadow should be at least 2 times the body of the candle itself and clearly stand out against the background of the previous shadows;
- on the reverse side, the shadow should be short or almost completely absent. A long shadow up on the peak says that during the day the price tried to break through the highs, but could not, returning almost to the opening price.
The advantage of the pin bar is that it is easy to see. Unlike the “pennant”, “flag”, where you can easily take what you want for the reality, it is difficult to make a mistake in building a pin bar. And let the real market does not draw such clear candles with shadows, as they do in theory on different sites, the pin-bar appears quite clearly.
Pin-bar usage rules:
- the most accurate signal is the formation of a pin-bar of binary options with a candle of the opposite color, that is, the closing price was lower than the opening price. If the color of the pin-bar candle coincides with the previous candle, then the signal may not be accurate;
- pin bar is used in conjunction with an oscillator, which confirms that the market is overbought or oversold;
- a short timeframe is not recommended due to possible redrawing of candles, price noise, delayed quotes;
- if the timeframe is H1, set the expiration for 1 hour. Enter the market on the next candle after the pin bar;
- it is better not to use liquid (volatile) pairs, at the time of the news release (report) not to trade. Because of the volatility, the pattern may not play itself completely;
- Pin bar formation should be at the level of resistance or support. If it is formed lower inside the price channel, then this is a false pin bar, due to a temporary correction. An example you can see in the figure below.
Professionals can use trading advisors based on graphical models. For example, the PinBar script. It can be installed in MT4 by registering with a broker Grand Capital, providing services in the Forex market and binary options. And additionally using the free services of the FxCash rebate service, you get the opportunity to partially compensate for the spread in Forex.