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 example we will show this strategy on 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 and 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 to the opposite side. She also stands out above the other candles, she has a long wick and a short body.
Candle number three meets all the parameters, the wick is deep below the others and 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 a loss, but the second two would be in profit and overall this strategy would show an interesting profit.
This strategy is intended for advanced traders.
