Barcode strategy in options
Everyone comes to the market with different expectations but aims for the same thing: to make money.
Pin bar trading is a simple, yet effective trading strategy that offers excellent risk-reward ratios. Technical analysis today differs significantly from the old days.
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ElliottGartleyGann, Dow, they all looked at complex market behaviour and put everything together in a trading theory. However, regardless of the approach, technical analysis outcome is to forecast future prices.
In the end, it is the trade that matters. For trading to make sense, money managemen t defines the potential of a trade, with a risk-reward ratio of minimum mandatory. Effectively, it means that for every pip risked, the reward should be at least twice the risk.
Elliott, for example, uses a complex logical approach to the market, interpreting various barcode strategy in options cycles of different degrees. After a time-consuming process, labeling impulsive and corrective waves, the result is a trade respecting at least as the risk-reward ratio.
Gartley uses Fibonacci ratios to find a trade at the bottom of a bullish or bearish trend. He developed a set of rules that results in a similar risk-reward ratio for a trade. All trading theories and concepts mentioned so far have a significant disadvantage. They are time-consuming. It takes a lot of time for the market to form a pattern with the Elliott or Gartley theories.
The same is valid for all classic technical analysis patterns : head and shoulders, wedges, flags, pennants, ascending and descending triangles, etc.
How about a simpler, yet effective approach to trading? The Beauty of a Single-Candlestick Pattern Since the Japanese introduced the candlesticks chart to the Western world, technical analysis changed completely. Japanese candlesticks made it easier for market participants to understand the price action within a period. Before that, bars charts were the preferred choice. However, while showing the opening and closing prices, they lack the follow-through we see when interpreting Japanese candlesticks.
Japanese candlesticks techniques differ strikingly from the classic pattern recognition approach knew at that time.
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Japanese patterns are known for taking less time and being at least as effective. Many of the patterns took the Western world entirely by surprise. Morning and evening stars, bullish and bearish engulfingnot to mention the Doji candles, are only a few examples.
Yet, the Western approach already knew one pattern. A single-bar pattern, the pin bar was used since the early technical analysis beginnings.
Nowadays a candlesticks chart is the preferred way among Forex traders to look at a market.
What Makes a Pin Bar?
Hence, barcode strategy in options pin bar became a single candle, but the principle to trade it are the same. The equivalent of a pin bar in the Japanese approach is the hammer pattern. A hammer is a bullish pattern that forms at the bottom of a bearish trend. Hence, a reversal pattern, or a bullish pin bar.
However, a barcode strategy in options pin bar at the end of a bullish trend has a different name in the Japanese approach: a shooting star. Therefore, the equivalent of a bullish and bearish pin bar in the Western approach is the hammer and the shooting star in the Japanese technical analysis.
But what makes a pin bar?
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What Makes a Pin Bar? Before more details, we need to explain what a candlestick is. To interpret a candlestick, traders consider the following: opening price the highest value the lowest value The difference between the opening and closing prices is the body of the candle.
Also known as the real body, it is bullish when the closing price is higher than the opening one, and bearish when is lower. The price action to the bitcoin mining bot or lowest point is the shadow or the tail. For a pin bar to form, traders look at the real body to be relatively small, and the tail of the candle much longer.
In fact, the longer the tail, the better. While not a general rule, savvy traders look for the following condition to happen before pin bar trading: the tail to be so long, so the real body fits at least two times.
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Conventional wisdom claims that a bullish pin bar must have a green body closing price bigger than the opening one and a bearish pin bar a red body closing price lower than the opening price.
It shows a terrible battle between bulls and bears, signalling that the previous trend weakens. Hence, for a bullish pin bar, a bearish trend must exist.
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- Compliance with these conditions contributes to making profits.
And, a bullish trend is mandatory before a barcode strategy in options pin bar forms. A pin bar trading strategy when it reverses a bullish trend considers the following steps: measure the entire length of the pin bar, from the lowest to its highest point go short when the price breaks the barcode strategy in options point place a stop loss order at the highest point in the bearish pin bar project the length of the pin bar minimum two times below the entry point Sometimes the market reverses so aggressively after a pin bar that the pin bar trading strategy offers a greater risk-reward ratio than Fibonacci Ratios with the Pin Bar Trading Setup Savvy traders have patience, and they know that any reversal pattern shows a conflict.
Supply And Demand
However, a pullback is more than welcomed. In fact, pullbacks often happen after a bullish or bearish pin bar.
Fibonacci ratios help in finding an even better risk-reward ratio. Hence, Fibonacci comes to complement the unique pin bar trading strategy by offering an even greater risk-reward ratio. Not bad for a single-candlestick pattern, right? Pin Bar Trading in Confluence Areas When two or more technical indicators point to a reversal from the same area, the market is said to form a confluence zone.
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Such places are difficult to break, and the rule of thumb goes that the higher the time frame, the stronger the area. A confluence area could be a support or resistance levelcoupled with another technical pattern.
The same we can say about pin bars. When a pin bar forms as part of a different pattern, the market signals a strong reversal potential. Pin Bars as Part of Classic Technical Analysis Patterns As mentioned at the start of this article, classic technical analysis patterns have the disadvantage of consuming a lot of time.