The candlesticks often form patterns on the price charts. Sometimes, they are called after animals like for example the butterflies or the bats. There is also one that is known as the Pig’s Hoof pattern. It is suitable for different traders’ types, so I decided to describe it for you. Check this article to read more about trading with it.
The Pig’s Hoof pattern overview
As you can guess the name of this pattern comes from its shape. It resembles the pig’s hoof. Take a look at the pictures below. The price reaches the support or resistance level, bounces back and touch the support/resistance again. Then, it reverses one more time and moves in the opposite direction.
Furthermore, the Pig’s Hoof pattern develops when the RSI indicator shows the divergence. We talk about the divergence when the price is falling and the indicator is growing or when the price is rising but the RSI is falling.
Note how the price is reaching the resistance level, then drops a little, hits the resistance again just to take the opposite course.
In the above example, there was the downtrend, then the price hit the support, bounce back, reach the support again and reverse.
In both pictures, you can observe that when the price touches the support or resistance lines the second time, the RSI is moving in the opposite direction. This is exactly what the divergence is about.
Trading with the Pig’s Hoof pattern on the Binomo platform
Setting up the chart
Log in to your Binomo account. Choose the asset and the Japanese candlesticks type of chart. Set the candles period for 1 minute.
Now, click on the Chart preferences icon and find the Relative Strength Index under the Indicators tab.
Using the Pig’s Hoof pattern in trading
There are three crucial things you have to look for when trading with the Pig’s Hoof pattern. First, wait for the price to hit the support/resistance and bounce back. Then, search for the special candles at the support/resistance level. They are giving information that a reversal is possible. Next, watch the RSI indicator. It should move in the opposite direction to the price bars. It should create a wave that resembles a hoof of the pig.
When there is a downtrend and the RSI shows the divergence, you can open a buy transaction. Keep the position open for 5 minutes if you are trading on the 1-minute period candles.
When the price is rising and you observe the divergence in the RSI window, you should open a sell trade.
Money management strategy to apply when trading with the Pig’s Hoof pattern on Binomo
Every time you are trading you should have a good money management strategy. The method I want to propose today is simple and can bring you closer to success. It is called compounding money management.
You should not invest too much in a single trade. Place 3% of your capital at most in one transaction. If, for instance, your account balance equals $100, invest no more than $3.
You may think it is a too small amount of money to bring you profit at the end of the day. But the compounding strategy implies that at the subsequent trade you invest the amount you have earned from the previous transaction. The table underneath illustrates this rule.
In the case of three successful transactions, you would earn $17.50. You can play around using different money management strategies on the demo account.
Psychology in trading
Trading requires certain psychological skills. Emotions are not good advisors and you need to be ready for different outcomes.
Let’s go back to the above example. Imagine you have lost all the trades. Your capital shrank by $9. How do you react? Do you want to recover your loss?
Consider the opposite situation. You have profited from all three transactions. Do you want to continue trading, hoping for the winning streak?
Every time you begin to trade you must have a trading plan prepared. It should include the number of trades you wish to enter in one day. It does not matter whether you win or lose. After that number is reached, you stop for a day. Sticking to the trading plan is a very important part of your success.
The Pig’s Hoof pattern pros
The pattern I am describing today is notably productive. Of course, you must stick to its rules. Remember about three things that have to happen in order to use the Pig’s Hoof pattern. There has to be a clear trend and the price has to reach the support or resistance, a special candle has to appear on the price chart and the RSI has to show the divergence.
You can apply the Pig’s Hoof pattern in the trending markets when there are price reversals.
Combine the pattern with the compounding money management strategy and you will gain profit just with a few transactions made in a day.
The Pig’s Hoof pattern cons
The disadvantage of using the Pig’s Hoof pattern is that it is best to apply when trading with short time frames. 1-minute candles are often avoided by beginners because they are more difficult to analyse. The pattern will also work on longer time frames, however, it will appear very infrequently so you should arm yourself with a great portion of patience.
Log in to your Binomo demo account and look for the Pig’s Hoof pattern straight away. Practice as long as you need to before moving to the real account. I would be happy to hear how you like trading with the Pig’s Hoof pattern on Binomo. Below, you will find the comments section where you can share your experience with us.