Trading binary options successfully is all about using the right strategies and leveraging the latest tools. One of the most powerful strategies used by smart traders is the pin bars. This is one of the most-effective methods to identify points during the course of trading where market reversals occur for the assets.
What are pin bars ?
Pin bars are nothing but candlestick reversal patterns that help identify any possible price reversal depending on their position at the top or bottom signals. Bearish reversal candlestick pin bars include the shooting star candlestick, the inverted hammer candlestick and the Doji candlestick. When any of the three appear at the top signal, it means there is an impending bearish reversal. Other popularly used pin bars include the dragonfly doji, the hammer and the hanging man. These pin bars are used to denote bullish trends. When they appear at the bottom of the market, it means the asset’s price is going to experience an upward swing.
How are pin bars effective price defining tools in binary options trading ?
Major binary options contract types that can be traded in using the pin bars tool include Touch/No Touch options and Call/Put digital options. The best way of effectively using pin bars to determine bullish or bearish trends is to combine them with other technical analysis tools. This will enhance the accuracy of signals making it easier for traders to make the right decisions.
- One way is to combine pin bars with a tool that confirms that the asset price is going to hit a bottom reversal after bouncing after hitting a string support.
- You can combine confirmation that a top reversal spurred by a strong resistance of the asset price with bearish pin bars for accurate signals.
So, what aspect will confirm that a strong resistance or support price is hit by the asset?
A simple way of identifying this trend is to see if the lower channel trend is acting as a support and the upper channel trend like a resistance. This means the asset price is confined within the price channel boundaries.
Another way is to use an automatic pivot calculator, usually available for free online, to trace daily pivot points which in turn can be used to define support and resistance.
Using time frame chart and indicators
Time frame chart is used by traders to determine the binary options trade’s expiry time. Traders popularly use two indicators namely the stochastic oscillator that help determine the oversold and over bought areas and the automatic pivot calculator.
- To identify bullish trade, you must check the appearance of pin bars after a continued downtrend period.
- Another aspect to check for is whether the pin bar is at the right support level.
- Check the stochastic oscillator to identify if it is an oversold market.
Similarly, bearish trade can be identified based on various factors.
- After a prolonged period of sustained uptrend, the bearish pin bar candlesticks appear
- The pin bar is at the right resistance level
- Overbought market is indicated by the stochastic oscillator
Example of a stochastic oscillator chart –Pin bar strategy can be used effectively to trade smart in the binary options market. You can master the art of using this strategy with a little practice and start making money on a regular basis.