There are many technical analysis tools available on the Binomo platform. The support and resistance levels are very important tools. But they serve best when you use them in a combination with special candles or some indicators. Today, I will describe a trading strategy which couples the support/resistance with the pin bars.
The Pin Bars overview
The pin bars are special candles. They appear when the bulls are fighting with the bears. They have an extremely small body and a long shadow on one side. There is a short shadow or no shadow at all on the other side of a candle. We distinguish bearish and bullish pin bars.
The bullish pin bars develop at the end of the downtrend. Their wicks are pointed downwards. The sellers were controlling the market until now. But the buyers become more active and make the price rise.
You can spot the bearish pin bars at the top of the uptrend. They have the wicks pointed upwards. Their shape confirms that the buyers were in control. But the sellers come into action and drive the prices down.
The support and resistance description
Sometimes the price falls into the range and seems not to go beyond it. These limits are known as support and resistance. The support is the level from which price bounces back and do not go lower. The resistance is the line that you can draw by joining the highs of the ranging price. The price bars seem not to go higher than this level.
Read more about the support and resistance in our article How To Set Up and Trade Using Support and Resistance on Binomo.
A trading strategy that combines the support/resistance with pin bar candles
Assume you have drawn the support and resistance lines on your chart. The prices fluctuate within them for some time. But this is very hard to predict, whether the next time they will bounce back again or maybe they will break beyond the limits.
This is why we are using pin bar candles here. When you spot a pin bar at the support or resistance level, you can be sure the price will reverse.
Opening a sell position with the pin bars on the resistance level
A bearish pin bar informs that the sellers fight with the buyers who were in dominance till now. Thanks to them the price is going down. This is why you should open a sell position when a bearish pin bar develops on the resistance level. With 5-minute period candles, you can keep the position open for at least 15 minutes.
Opening a buy position with the pin bars on the support level
A bullish pin bar signals that the buyers have stepped in and prevented the price from moving further down. When you notice that a bullish pin bar develops on the support level, open a buy trade. Your trade can last 15 minutes or more if you are trading with 5-minute period candles. Take a look at the EURJPY 5m chart below.
Final words
Knowing how to draw the support and resistance levels and how they work is very important for successful trading. But they do not reveal entry points on their own. That is why you should use them together with some indicators or special candles. Today I have shown you how to combine them with the pin bars.
You just have to identify the support and resistance levels and then wait for a bullish or a bearish pin bar to develop.
Head to your Binomo demo account and try this strategy right away. Tell us about your experience in trading with the support/resistance alongside pin bars in the comments section which you will find down below the site.
Best of luck!