Playing the Pinochio bar: The 2 methods.
Step 1 is the same for both methods; Identifying the potential Pinbar. The difference between the 2 methods is the way you enter your trade.
Step 1: Look for bar with a new high, the open and close near or at the same levels, and below the high of the bar before it.
It is not always necesary, but it is always better to see that the nose has penetrated some form of resistence (MA, Pivot Points or Fibonacci. )
Many times the close of the nose will not drop to the level of the open until minutes or seconds before the close of the bar.
Remember if the close is not below the high if the left eye, it's not a Pinbar!
Medthod #1: Aggresive
Sometimes, right after the nose bar closes, the next bar will open and immediatly take off in your favor, but sometimes without you! This aggresive method makes sure that doesn't happen, but not without a little bit more risk.
Step 2a: To ensure that the trade doesn't leave without you, place a sell stop-limit order right below the low of the nose. In this case, it would be on the .618 fibonacci line, right inside the red circle. This way you are filled and happily making pips when then bar decides to drop like a rock without retracing at all.
Place your stop just above the top of the nose. For an even more aggressive trade, place your stop at the .618 level of the nose bar. In this case it would be around where the blue 76% fibonocci is.
Method #2: Conservative
Many times the right eye will test the level of the left eye before reversing and plumetting.
Step 2b: The more conservative way to enter the trade, is to enter when the right eye has tested the left eye. This will faciliate a smaller stop and lessen your total risk. The drawback of the conservative method, is that if the right eye doesnt test the left eye before dropping, you will miss out on that trade.
The Big Picture
As simple as the Pinbar may seem, it still takes some practice to execute successfully. But once you get it down, you will be very happy you found this website :) Good Luck !
