Technical charts which include candlesticks are one of the most valuable tools that a binary options trader can use. This strategy will require the use of such a chart, along with some basic knowledge of how to recognize candle patterns within that chart. The goal of this strategy is to be able to identify points where a price reversal is highly likely, and then to enter into a trade according to the information provided.
Pin bars help to reveal upcoming reversals by comparing their placement to top/bottom indicators. Shooting star, inverted hammer, and doji are three bearish patterns to look to looking for. When any of these appear at the upper signal, the odds of a bearish reversal are high. Dragonfly doji, hammer, and hang man are the three bullish patterns to look for. When these appear at the lower signal, the odds of a bullish reversal are high. Those who are not yet familiar with these patterns will need to become familiar with them prior to using this strategy.
Although best used along with Call or Put trades, this binary options strategy can also be used along with One Touch and No Touch instruments. Pin bars are helpful in forecasting price movement, but they should not be used as a stand-alone indicator. Consider the use of an additional indicator that can show the likelihood of the price reaching either a key level of support or resistance, at which point a reversal becomes likely.
Do check to see if the low channel trend is functioning as a level of support, while the top channel is functioning as a level of resistance. Additionally, consider using a pivot point calculator for additional validation. Two or more forms of verification should be included in every strategy, and not only this one. Pivot point calculators and similar tools are offered by some binary options brokers, but if your broker does not offer one, they can be accessed from various websites at no cost.
To identify bullish conditions, confirm that the pin bars appear shortly after a downward trend has continued for a period of time. Also check to see whether or not the pin bar is located at the key level of support. Reverse these steps for bearish conditions, following an uptrend rather than a downward trend. Here, the pin bar should be at the key level of resistance. As for the correct expiry time, this will vary. Shorter time frames can be studied, but when a lasting trend is in place, the period being analyzed will need to be longer.
If you wish to confirm overbuying or overselling taking place in the market, use a stochastic oscillator. This is not a requirement, but taking this extra step will certainly increase the win rate associated with this binary options strategy. This strategy is not recommended for new traders, but can be used by those who do have some experience with candlestick charts. Always remember, strategies can be tested without any need for investment, and should be before any money is risked in using them.