There are a lot of trading strategies that you can use on the Binomo platform. Many popular techniques are based on the piercing pattern. This article covers the basics of these strategies and how to trade with them in the Binomo app/website.
What is the piercing pattern?
The piercing pattern is a two-day candlestick pattern used to signal a potential reversal in a downtrend. It is composed of a black/red candlestick followed by white/green one whose close is above the midpoint of the black candlestick’s real body. This strategy is considered a bullish reversal signal and is often used on Binomo when trading long positions.
To enter the market, the trader would wait for the piercing pattern to form and then place a buy-stop order above the high of the white candlestick. The stop loss would be set below the low of the black candlestick. The target profit could be taken at a Fibonacci or previous support level.
Structure of the piercing line
The piercing line appears at the end of a downtrend. To identify the pattern, look for a period of decline followed by a candlestick that gaps lower (bullish candle) or at the same level. The candle then closes above the 50% level of the previous candle (bearish candle).
The piercing line pattern shows that the bulls (sellers) were able to push the price higher despite the previous period’s bearish (buyers) momentum. The bullish reversal is confirmed when the price closes above the previous period’s high.
This candlestick pattern is similar to the Dark Cloud Cover candlestick pattern. Also, a Piercing line pattern leads to a Hammer candlestick pattern. It is one of the most common reversal signals from decreasing to increasing.
Trading strategies with piercing pattern
The piercing line patterns are rare, and relying on them alone can be risky. They are best when combined with other trading tools, such as indicators:
- Piercing pattern combined with relative strength index (RSI)
The RSI is one of the most common momentum oscillators measured over 14 days. It is displayed as a line graph, fluctuating from 0-100. A scale of 30 or below indicates oversold, while 70 and above show overbought condition.
The appearance of a piercing pattern while the RSI is in the overload zone indicates that the price is likely to rise.
- Piercing pattern combined with Bollinger Bands
Bollinger Bands are derived from a moving average and two standard deviations from it. Using this indicator can be the best strategy for measuring market volatility. It predicts future short market movements and helps traders spot potential entry and exit points. When the price breaks from the lower one of the Bollinger Bands and forms the piercing pattern, that is the perfect time to open a trade.
Other strategies you can use include Moving Average Convergence/Divergence (MACD) and Fibonacci levels.
Conclusion
You can use the piercing pattern in various markets, such as stock, forex, etc. With it, you can make more informed trading decisions and more accurate forecasts. However, it is best to remember that no single strategy can be winning on its own, and trading carries the risk of losing capital. Before applying any technique on a real Binomo account, complete education and practice on a demo.
