It is part of the "Price Action" business strategy and serves to capture market turnover by forming three candles with long wicks, called a pin bar. In simplicity, the theory is that if one side of the market fails to maintain the price for the duration of the candle and the other side wins, a turnaround may occur in the market. Therefore, we will look for candles in the graphs that have a long wick and a short body and stand out significantly either above the other candles or below the other candles.
We can use any time frame and financial instrument, but for now the strategy will be shown on the example of the currency pair EUR / AUD.
Candle number one meets the parameters and its wick is deep below the other candles. While the body of the candle is short, the wick is long. The declining trend (bearish trend) did not keep the price at lower levels and the market turned upwards.
Candle number two is the same case, but on the opposite side. It also stands out above the other candles; it has a long wick and a short body.
Candle number three meets all the parameters; the wick is deep below the others, the bears did not keep the price, and there was a sharp turnaround.
How to trade open positions? If you notice such a candle, it may indicate a market turnaround. If it is a bull candle (wick upwards), it is good to choose a pending Buy Stop 20 pips above the maximum of the candle.
In the case of a bear candle (wick downwards), it is advisable to choose the Sell Stop 20 pips order below the minimum of the given candle. Stop Loss can be used in our case 80 pips and also profit 150-200 pips. The first position would end in loss, but the second two would be in profit, and this strategy would overall show an interesting profit.
This strategy is intended for advanced traders.