Being able to read Japanese candlesticks is a skill that all binary option traders need to learn. In this lesson Sam teaches the Pinbar candlestick – a powerful single candle set-up and can be used as a trading signal.
BO106 Lesson – Pin Bar Candles Transcript
Welcome to Binary Options 106: Pinbar Candlesticks. This course is brought to you by binaryoptions.education. My name’s Sam, and welcome to a video which is part of our Binary Options 100 training course.
Before I explain what pinball candlesticks are and demonstrate the power of them, I think it’s worth just taking a bit of time to give an overview of Japanese candlesticks.
So each candle has an opening price and a closing price. So this was a 15-minute candle. This candle could have opened down here at a quarter past three, and at half past three it would have closed. And the difference between the opening and closing price, it creates a candle body.
Now by default, a lot of charts have green and red candles to represent bullish and bearish candles. So I kept in line with those defaults. But these candles can really be any color. If the closing price is higher than the opening price, then you would have a green candle, or a bullish candle. If the closing price was lower than the opening price, a red candle would be created, or a bearish candle.
Candles can have wicks, an upper wick and a lower wick. And these wicks are footprints of where price was during the duration of the candle. So even though price closed here, during the time of this candle price was up here and price was down here. So candles let us know of the opening and closing price, and they also let us know where price was during the length or duration of the candle.
So let’s look at some real-life Japanese candlesticks. This is a chart of the British pound against the US dollar. And it’s a four-hour time frame, so each of these candles represent four hours of price data. If we zoom in to get a better look at these candles– so after a four-hour period, this candle would have opened here. And once four hours would have passed, it closed here. You’ll notice there’s a wick down to here and a tiny wick just at the top here. So price opened here. It closed here after four hours, and price was down here and was slightly bullish for a time.
So after our four hours, this candle closed and this one opened here and closed down here. Price was up here at some point during the four hours, and it was down here. Price that opens here, after four hours it closes here. The price was up here, and it was down here.
So what are pinbar candlesticks? Pinbar candlesticks are identified by their non-wicks on one side of the candle, and they have a small body. Pinbar candlesticks are identified by their small body and a large wick on either the upper side or lower side of the candle. For example, this candle has a very small body and a long lower wick. This candle has a very small body and a long upper wick. It doesn’t matter if there is a small wick on the other side of the body, as long as there is a long wick on one side of the body and the body is small.
If the long wick is on the lower side of the body, this would be a bullish pinbar. If the long wick is on the upper side of the candle body, we would refer to that as a bearish pinbar. So why are these pinbars so important? Well, they tell us that price opened here and closed here. But more importantly, they tell us that price was all the way down here. But because of strong buying power, or bullish power, prices moved from down here all the way up to here. So buyers are really coming in and pushing price on the upside. Where the bearish pinbar, obviously price opened here and closed here. But more importantly, price was up here, but has been pushed down by strong selling or bearish power.
Pinbar candlesticks can act as a signal of price reversing. With so much buying power coming into the market, price could move in an upwards direction. With so a much bearish or selling power coming into the market, price could move in a downwards direction. And let me explain further with a price chart. So this is all pound against the dollar for [? rally ?] chart again. Price is moving on the upside. And then we’ve had this strong sudden bearish movement.
Now before this sudden movement, there is a bearish pinbar. Let’s see then. We have our typical small body and non-wick on one side of the candle. There is a small wick on the lower side of the candle. But the two characteristics of a pinbar are a long wick on one side of the candle and a small body. So this bearish pinbar on this occasion would have been a good signal to sell or place a [? put. ?]
We have some very strong pinbars here. Price has come up. And then we have this very large pinbar, small body very large wick, another bearish pinbar, a signal to sell, and price falls on the downside Price is coming on the downside, and we have a bullish pinbar. A small body and a large wick, and then price goes on the upside.
We have another bearish pinbar up here. Prices come up. We get this pinbar, and price goes on the downside. Just like every signal that can be used to trade financial markets, pinbars do not work 100% of the time. For example, we have a pinbar here, a bullish pinbar, but price continues to fall on the downside. But when we combine pinbars with other signals and indicators, they can act as a strong signal when speculating where future price is going to be.
In the next few videos I will continue to look at Japanese candlesticks and other candle signals that are available.