With its unique shape, the Pinocchio Bar has a good level of accuracy in detecting reversal. How do you use this pattern in trading?

Pinocchio Bar is one of the most popular candlestick patterns traders commonly use to analyze the market. This candlestick pattern can provide helpful information about potential reversal or direction changes.

Although it is classified as a simple candlestick pattern, Pinocchio Bar is quite effective in helping traders predict future market movements. There are two ways to use Pinocchio Bar to strengthen the trading analysis. First, by using Fibonacci Retracement, and second, by using RSI. How to use them?

Pinocchio bar

 

What is Pinocchio Bar?

Pinocchio Bar, also known as Pin Bar, is one of the candlestick patterns that consists of one candlestick with a very long wick and a relatively short body. In this case, the very long wick resembles the shape of Pinocchio's nose.

Traders consider the Pinocchio Bar pattern to indicate uncertainty or doubt in the market about the direction of price movements. The longer the wick of the Pinocchio Bar, the stronger the indication of price rejection at a certain level, which means that the price is likely to experience a reversal.

In addition, the position of the wick on the Pinocchio Bar can also provide helpful information for traders. If the wick points upwards, this pattern indicates a potential reversal from a bullish trend to a bearish one. Conversely, if the long wick points downwards, it indicates a potential reversal from a bearish trend to a bullish one.

 

Characteristics of the Pinocchio Bar Pattern

The Pinocchio Bar has several distinct characteristics that differentiate it from other candlestick patterns. Some examples include:

  • Long wick: The main characteristic of the Pinocchio Bar is the very long wick that can be much longer than the body of the candlestick itself. This wick shows the difference between the highest or lowest price and the opening or closing price. This very long wick indicates very strong buying or selling pressure in the market and is likely to be followed by a reversal.
  • Short body: Besides the long wick, the Pinocchio Bar has a relatively short body. In this case, the short body indicates that the price opened and closed at similar levels.
  • The candlestick color is not significant: The color on the Pinocchio Bar does not always have significant meaning as it does not determine the characteristics of this pattern. However, some traders may pay attention to the color of the Pinocchio Bar to help identify its reversal signals.
  • Unequal length wick: Although one wick on the Pinocchio Bar tends to be very long, the wick on the other side of this pattern is not always the same length. A longer wick indicates stronger buying or selling pressure, while a shorter wick indicates less significant price differences.

Occurs after a fast movement. The Pinocchio Bar usually occurs after a fast and significant price movement. This movement can be a strong bullish or bearish trend or occur after the release of important news or high-impact events that affect the market.

 

Pinocchio Bar Trading Strategy

The Pinocchio Bar pattern is quite flexible as it can be used in various trading strategies. Here are some examples of using the Pinocchio Bar pattern for trading.

 

1. Pinocchio Bar with 50% Retracement

The first example of using the Pinocchio Bar pattern is combining it with Fibonacci Retracement. To get maximum results with this strategy, please follow the Buy and Sell rules below:

Sell Entry Scenario:

  • A Pinocchio Bar appears at the end of an uptrend on the D1 (Daily) timeframe.
  • Place a Fibonacci Retracement, and draw it from the top to the bottom of the Pinocchio Bar.
  • Place a Sell Limit in the Fibonacci Retracement area of 50%.
  • Place the stop loss a few pips above the daily Pinocchio Bar.
  • Take profit ideally follows a Risk Reward Ratio of 1:3.

For a better understanding, please refer to the image below.

entry

 

Buy Entry Scenario:

  • There is a Pinocchio Bar pattern at the end of a downtrend on the D1 (daily) time frame.
  • Place a Fibonacci Retracement from the top to the bottom of the Pinocchio Bar.
  • Place a Buy Limit in the 50% Fibonacci Retracement area.
  • Stop Loss can be placed a few pips below the daily Pinocchio Bar.
  • Ideal take profit should follow a Risk Reward Ratio of 1:3.

Refer to the image below for more details.

entry

 

2. Pinocchio Bar Strategy with RSI Indicator

The following technique combines the Pinocchio Bar with the RSI indicator to look for reversal signals when Overbought or Oversold occurs.

Sell Entry Scenario:

  • Use a 4-hour (H4) or higher chart to minimize price noise.
  • Pinocchio Bar appears at the end of an uptrend.
  • Observe the Pinocchio Bar that is in the Overbought zone.
  • Open a Sell position when the price crosses the RSI line of 70 from top to bottom.
  • Stop loss can be placed above or at the end of the Pinocchio Bar.
  • Take profit should be adjusted to each Risk Reward Ratio.

An example of the application of the Pinocchio Bar with the RSI Indicator is shown below.

entry

Scenario Entry Buy

  • Use a 4-hour (H4) chart or higher to minimize price noise.
  • There is a Pinocchio Bar pattern at the end of a downtrend.
  • Observe Pinocchio Bar patterns that are in the Oversold or oversold zone.
  • Open a Buy position when the price crosses the RSI 30 line from below to above.
  • Stop loss can be placed below or at the end of the Pinocchio Bar.
  • Take profit according to each Risk Reward Ratio.
  • To see more clearly, please see the image below.

entry

 

Candlesticks such as Pinocchio is a great tools for mastering Price Action trading. But memorizing all of them is impossible. Is there any other way to master this?