How to Trade the Pinocchio Bar in Binary Options

What is Pinocchio Bar?

The Pinocchio bar, also known as the pin bar, is a one candlestick pattern. The candlestick has a small body and either a long upper wick or a long lower wick.

Meaning, the body is pushed to one end of the candlestick range as either the upper or the lower wick dominates.

If a pin bar has a long upper wick, then the lower wick is small or non-existent.

On the other hand, if a pin bar has a long lower wick, then the upper wick is small or non-existent as well.

Even if you have not heard about Pinocchio, you must be conversant with the pin bar, and they are the same thing – Pin for Pinocchio.

Now, the reason a candlestick pattern would be referred to as a Pinocchio pattern is that it lies.

The Pinocchio bar can lie where traders anticipate trading breakouts.

The Psychology behind the Pinocchio Bar.

When you want to trade a breakout above a certain level (resistance), you would place a buy stop order at that level.

This is done so that the stop order is activated when the price hits that level before continuing upwards.

Now, the price may indeed rally upwards at that level but then experience a rejection downwards to close back below the resistance level.

It may then begin to rally downwards, the complete opposite direction to your anticipated direction.

If that happens, the Pinocchio bar will have tricked or lied to the trader, or rather, the market will have lied to the trader by means of a pin bar, trapping them in a losing buy trade.

Basically, there are two types of Pinocchio bars – bullish and bearish.

A bullish Pinocchio bar has a small body pushed to the upper part of the candlestick range and a long lower wick.

On the flip side, a bearish Pinocchio bar has a small body pushed to the lower part of the candlestick range and a long upper wick.

For both bullish and bearish Pinocchio bars, the wick should be at least two-thirds of the bar range for the Pinocchio bar to be at its best version.

The color of the body is of less significance in the Pinocchio bar, because what matters while trading the Pinocchio bar is the market context.

We will find out more as we progress.

Trading the Pinocchio Bar in Olymp Trade like a Pro.

Now that you know the structure and the psychology behind the Pinocchio bar, you need to know how that can help your ailing trading account at Olymp Trade, don’t you?

Well, you are in the right place.

In this post, I will show you how you can trade the Pin bar in Olymp Trade like a pro.

Here, you will find tips to elevate you from a newbie or novice trader in the Pin bar trading to riding the markets like a pro using the same Pinocchio bar.

Here are the simple steps which will pave your path to trading the Pinocchio bar in Olymp Trade like a pro:

1. Establish the Market Context.

Novice traders are excited at every Pinocchio or Pin bar, forgetting to factor in the market context.

Well, let me tell you what pros do, and because you wanna trade this Pin bar like a pro, then you too should.

Pros don’t get excited at every other Pin bar, but only consider those Pinocchio bars which marry the market context perfectly.

What do I mean by market context here?

I mean the general trend, or a hint to the possible direction of the market.

Once you establish a high likelihood of the market moving in a particular direction, you will only use the Pinocchio bar as an entry trigger.

Enter the market early to profit maximally.

Pros have a common way of establishing the market context, which works perfectly with the Pinocchio bar.

This is none other than support and resistance!

Support will be that level in which the price tends not to break downwards but reverses or is rejected upwards upon hitting it.

Resistance, on the other hand, is that level at which the price tends not to break upwards but reverses or is rejected downwards upon hitting it.

Support and resistance zones and levels are always occurring on the price of any asset at any timeframe.

So you just need to look at the charts and spot them, then draw distinguishing horizontal lines for both the support and the resistance.

Support or resistance levels drawn at higher timeframes than the trading timeframe work best.

At a support level, you expect a bullish Pin bar while at a resistance level, you expect a bearish Pinocchio bar.

We shall see other defining criteria for bullish and bearish Pinocchio bars other than what’s already in the introduction.

2. Identify a Pinocchio Bar.

If you have established support and resistance levels, just like pros do, and know what type of a Pinocchio bar to expect, then this is the next step.

You will need to identify that Pinocchio bar you expect, to trigger your entry.

Here are the specifications of a bullish Pin bar:

• The bar or candlestick opens above a support level.
• Bar trades below the support level for most of the range of the candlestick.
• The candlestick closes above the support level.
• The body is small and pushed to the upper part of the bar range, hence a long lower wick. The wick is at least two-thirds of the whole candlestick range.

Conversely, here are the specifications of a bearish Pinocchio bar:

• The bar or candlestick opens below a resistance level.
• The bar trades above the resistance level for most of the range of the candlestick.
• Candlestick closes below the resistance level.
• The body is small and pushed to the lower part of the bar range, hence a long upper wick. The wick is at least two-thirds of the whole candlestick range.

Identify the respective Pin bar in order to proceed to entry.

Remember, the list above are not rules but guidelines to spotting the perfect Pin bar and so variations may occur.

Exercise trader discretion to make sound decisions.

3. Enter Buy or Sell Position.

The Pin bar was an entry trigger.

If you spot it at the respective level and the crucial criteria are met, then you only need to enter the market.

Support level + good bullish Pin bar = Buy Position.

Resistance level + good bearish Pinocchio bar = Sell Position.

4. Adjust Stop Loss and Take Profit.

The Stop Loss for your buy position better be just below the low of the bullish pin bar.

For your sell position, the Stop Loss should be just above the high of the bearish pin bar.

The Take Profit for this set up can be at the resistance or support.

For the buy position, take profit at the resistance opposite the support level you entered the position at.

For the sell position, take profit at the support level opposite the resistance level you entered the position at.

Happy Trading!

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