Effective trading strategy Pinocchio Binary Options Trading Strategy
We have emphasized over and over again the need to find and implement an effective binary options strategy if you are going to be successful at trading in this market. There are several good ones to choose from and of those, opinions differ as to which ones work the best and you can be the most successful with. One of the most common and popular strategies for trading binary options is called the Pinocchio Strategy.
You are familiar with what they call candles on technical charts. Each candle on a technical chart can tell us up to five pieces of information. The body, or the fat part of the candlestick, tells us what price the asset opened at and closed at.
It also tells us whether the market that day was bullish or bearish by if it’s light or dark; a dark body represents a bearish pattern and a light body a bullish pattern. It also has a wick at either end of the candle which represents the highest and lowest prices that the asset was traded at for during the time period of the candle. Once you learn how to interpret candles you can decipher these types of technical charts very easily.
The Pinocchio strategy is called such because it looks at candles which have small bodies and very large wicks; these are called Pinocchio or Pin Bars. They get their name because just as Pinocchio’s nose grew when he told a lie, so does the long wick of a Pinocchio bar as it tells us even though the market is trending in one direction it is lying and will soon trend in the other direction. It is at this point that most veteran traders will then place trades against the current trend. When the long wick is pointed down you should place a call option and when the long wick is pointed up you would place a put option.
Pinocchio strategy is an easy to apply strategy that is excellent for beginners to make some quick money with. This type of simple strategy only requires you to have a basic knowledge of the markets and you don’t have to have any experience analyzing with technical trading tools to use it.
The profits extracting strategy is effective in more than one type of trading also because Pinocchio strategy can be used in either binary options trading or for trading currency pairs. Pinocchio candles can be easily seen on technical charts of both commodities and indexes and that makes them useful for placing trades that are profitable for you right away.
There are three necessary components that pertain to using Pinocchio Strategy. The first is that when you use the strategy, it will always be composed of at least one candle and maybe more. Second, the candle will either be clearly white or dark (this is called being strongly marked) and lastly it will tell you if the market is bearish or bullish so you will know as to which direction to place the trade.
So what signals do you look for to make a successful trade using a Pinocchio bar strategy? A Pinocchio bar that you are going to base a binary options trade on should have a long wick or be shadow coded in a way that it directs against the current trend. The next is that you place a put or call option on the information based on the third candle trending upward or downward; this third candle is said to shadow or block the Pinocchio bar body. Follow these keys and you should be able to make a successful and profitable trade when using Pinocchio Strategy.
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References and Further Reading:
1. Endogenous and exogenous contributions to market activity: an Hawkes process approach (M RAMBALDI – 2013)
2. A Step-By-Step Implementation of a Multi-Agent Currency Trading System (RP Barbosa, O Belo – 2010)
3. ARIMA Modeling and Simulation of Currency Pairs (K BERNDTSSON – 2012)
4. Dynamic Linkages in the Pairs (GBP/EUR, USD/EUR) and (GBP/USD, EUR/USD): How Do They Change During a Day? (M Doman, R Doman – 2014)
5. PROPOSAL OF INVESTMENT PORTFOLIO OF HEDGE FUND (J Budík, R Doskočil, L Niebauerová – 2012)
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