Identifying and trading pin bars can be another profitable stratergy as long as you have the patience to wait for a pin bar set up. ( as in the diagram above ).This set up can be traded alongside any other stratergy being used at any given time and works realy well when the tail of the pin bar has just bounced back off one of your support and resistance lines ( covered in my last article “Understanding Support and Resistance Lines ” ).
The pin bar set up is usually a strong indication that the trend direction is about to change immediately.
Pin bars are identified by their long tails, small body and short nose. The candle body has to be less than one third of the length of the long tail.
The bearish pin bar is typically preceded by a bullish candle and is caused by the price of the traded asset rising within a single candle and then the price is forced back down and closes lower tha the close of the previous bullish candle and followed by bearish candle as seen in the above diagram and vice versa for the bullish pin bar.
This Stratergy is fairly straight foward, once the pin bar has closed you can either enter a trade at the start of the next candle or you can wait for the close of the next candle known as the confirmation candle as in the diagram above, I usually enter the trade as soon as the pin bar closes, but that’s just the way I trade having a higher appetite for risk, if you are just starting out trading binary options I would suggest waiting for the confirmation candle to close, hence lessening risk.
So for instance, the price of an asset is trending up on a five minute chart and a pin bar candle has formed and closed, you can either take a five minute PUT trade at the close of that pin bar candle or wait for the confirmation candle to close or slightly earlier if you wish and place a five minute PUT trade.
As usual always test this stratergy out on a demo account before trading on your live account.