Pinocchio Strategy (EURUSD, H1)
A disciplined way to trade «Pinocchio» bars (false breaks) on EURUSD H1.
We identify long‑wick rejections at key levels, then wait for reclaim/confirmation before committing. No blind fading.
Tools
- Key levels: prior day high/low, sessions, weekly opens; optional VWAP.
- Structure filter: HH/HL vs LH/LL to avoid counter‑trend traps.
- ATR(14, H1) for stop and position sizing.
Market logic
A Pinocchio bar is a failed excursion beyond a level: long tail outside, body closing back inside. Follow‑through improves when the next candle confirms the reclaim.
Setup checklist
- Level is defined and price makes a probe through it.
- Candle prints a long wick beyond the level; close back inside.
- Confirmation: next candle holds/continues inside and aligns with structure.
Trigger
- Long: wick below support with close back inside; then a higher close or quick retest‑hold.
- Short: mirror at resistance.
Entry
- Market on confirm close or limit on a shallow dip/rally into the reclaimed level.
Stop Loss
- Beyond the wick extreme or ATR(14) × 1.0–1.4 (whichever is wider).
Take Profit / Management
- TP1: take 1/2 at 1.2R–1.6R.
- TP2: trail behind last swing; reduce near session/weekly levels.
Filters & risk
- Skip during news spikes and when structure is unclear/flat.
- Avoid sequences of alternating Pinocchios (whipsaw).
- Risk ≤ 0.5% per position; one active trade per direction.