Trading the pin bar setup
The pin bars is one of the lost illustrious Candlestick formation when it comes to price action style of trading.
The pin bar is a price reversal pattern in the market which state the price is changing direction.
Many of us must have seen this candles on our chart, but not know how to trade them.
Types of pin bars bullish pin bar: on this candlestick the pin bar’s tail points towards down because it shows there are rejection at the support or the lower price which means the buyers seems to have taken over Bearish pin bars: this is almost the same as the bullish pin bars, the difference is that the tail points toward up which means there is rejection at the top of the session.
With pin bars candlestick, the longer the tail the more likely the the price will move higher or lower in the consequential session.
Differentiating between good and fake pin bars.
For pin bars to be effective, we need to look at the previous price action, if the previous price action was not really align with the wick it's better to ignore. For example when we suddenly spot a bullish long wick bullish pin bars on a bearish trend, this type of pin bars mostly end up to be fake, but if the price action was previously bullish, it's perfect buying opportunity, but when this formation occur at a major support area, we have to be patient for confirmation through the next two candle.
Above is a perfect entry point, we could see the previous candle was bullish which the pin bar candle actually means a continuation of trend.
Forex candlesticks basically refer to the formation on the chart in the forex market which signifies the open, high, low and close of a financial currency.
The forex candlestick is basically known aa Japanese Candlestick, of course with it origin based in Japan. The candlestick will usually represent the movement of prices of financial currencies in the forex market over a specific period of time. Say for the 4hrs time frame, each candlestick on the chart will represent the activities of the market over four hours, for a 5mins time frame candlesticks formed on the chart will represent a five minute market activity, and so on.
The forex candlestick is a concept more understood and put to use by technical analyst in the market. It enables them to carry out quality analysis with the use of the technical analysis system. It assist traders to get the representation of the market in real time and when used with other technical indicators can serve as a means of getting into high probability trades.
Candlesticks formation in the market comes with multiple patterns with all of these patterms holding a unique meaning to itself which will eventually determine traders decision in the market. Some patterns might represent continuation of a trend in the market while others will show reversals of the current market trend. Candlesticks can as well represent the volatility available in the market.
Pin Bar Candlestick
Pin bar is what is being used as the alias for pinocchio bar and it refers to a single candlestick setup in the market which represents or imitates a possible reversal of trend/price.
The pin bar is often characterized with small bodies and large wicks. The wicks of the candle might be as large as two times the body of the candle itself.
Pin bars will occur in the market after a trend has continued for a long time and traders following the trend are beginning to get tired. Formation of the pin bar in the chart shows that those on the opposing trend are beginning to gain momentum, and there is a possibility that they could take over the market and change the perception of the trend.
With trading pin bars, the colour of the candles are not all that important.
How To Trade Pin Bar:
The following should help a trader with identifying what pin bar to trade in the forex market.
1. Identify the pin bar which forms on important areas and zones. Pin bar that forms on support or resistance levels, trendlines or demand and supply zones are worthy of being considered to trade.
2. After confirmation has been made, enter into a trade of the opposing trend/direction in the market.
3. Risk and money management is important in case of a losing trade. Stop loss should be placed at the end of the wick of the pin bar, little space could be given. Take profit should be placed on identifiable areas on the chart, trailing stops could be used as well.
4. Leave the trade and let the market do it thing.
Trading pin bars will not always win in the market, but following the rules above will make sure that traders get into more wins that losses trading the pin bar.
Types Of Pin Bar Candle
1. Bullish Pin Bar: formation of the bullish pin bar will have the body of the candle close to the high. It signifies that sellers cannot longer push the market down and buyers are beginning to take over the market. It signifies a possible buy in the market.
2. Bearish Pin Bar: a bearish pin bar is a candlestick formed on the market chart haracterized with a long tail. The body of the pin bar will usually be close to the low of the candle. Some lows will qualify as the close of the candle. This shows that the market could possible fall and prices will come down.
One of the most reliable candle formations you can see on the Forex chart is the pin bar. Many traders consider this as one of the most powerful candlestick patterns for trading. So today’s discussion will be dedicated entirely to the pin bar reversal candle. The Pin Bar Setup
I bet you have seen many pin bars on your Forex charts. Maybe you haven’t been aware that you are looking at a pin bar formation per se, but you most likely have come across this candle Bullish Pin Bar
A reliable and valid, tradeable bullish pin bar is located at the end of a bearish trend and its lower candle wick goes below the overall price action. If you spot a bullish pin bar setup on the chart, this will setup a nice opportunity for a long position.
Bearish Pin Bar
The bearish pin bar is located at the end of a bullish trend and its longer candle wick is the upper area. In this manner, the longer wick is sticking out above the price action. The bearish pin bar is usually a good sign of an upcoming price reversal in the bearish direction.
Pin Bar :
is price action pattern which is supposed to be a signal a reversal in market trend which may be from an upward trend to a downward trend, or from a downward trend to an upward trend, and there are two types of pin bar candlestick patterns which are :
-Bullish Pin Bar :
is a type of pin bar candlestick patterns which is formed when price of particular asset opens and trades lower below a strong support level and before the candlestick closes, the support level pushes the price up again to make it closes near from the open price, creating a candlestick with long lower shadow, small body, and very small or non-existent upper shadow, but there are some conditions you should put into consideration for this type of candlestick patterns, which are :
* The lower shadow or tail should be at least three times the length of the candlestick body.
* the candlestick should open and close within the previous candlestick.
And for more clarification you can take a look on the below image to know exactly how the bullish pin bar candlestick is formed :
- Bearish Pin Bar :
is a type of pin bar candlestick patterns which is formed when price of particular asset opens and trades higher above a strong resistance level and before the candlestick closes, the resistance level pushes the price down again to make it closes near from the open price, creating a candlestick with a long upper shadow, small body, and very small or non-existent lower shadow, and there are some conditions you should put into consideration for the bearish pin bar candlestick, where :
* its upper shadow or tail should be at least three times the length of the candlestick body.
* the candlestick should open and close within the previous candlestick.
And for more clarification you can take a look on the below image to know exactly how the bearish pin bar candlestick is formed :
hello friendz how are you all i hope you all are fine and enjoying the weekend.so guys we can trade on pin bar setups it is a very good reversal signal for reversal it is also a entry point in technical analysis but dont take a trde when you are in centre of chart take a trade when the market is at the top or bottom of chart because it makes a good signal of reversal.
thanks alot with best regards.
Pinbar candle is very very important candle for trading for those people who used candle stick chart this candle is very good signal for changing the trend of market and we easily make our decision for opening any trade through this candlecandlestick will usually represent the movement of prices of financial currencies in the forex market over a specific period of time. Say for the 4hrs time frame, each candlestick on the chart will represent the activities of the market over four hours, for a 5mins time frame candlesticks formed on the chart will represent a five minute market activitycandlestick patterns which is formed when price of particular asset opens and trades higher above a strong resistance level and before the candlestick closes, the resistance level pushes the price down again to make it closes near from the open price, creating a candlestick with a long upper shadow, small body, and very small or non-existent lower shadow, and there are some conditions you should put into consideration for the bearish pin bar candlestickPin bars will occur in the market after a trend has continued for a long time and traders following the trend are beginning to get tired. Formation of the pin bar in the chart shows that those on the opposing trend are beginning to gain momentum, and there is a possibility that they could take over the market
The forex candlestick is basically known aa Japanese Candlestick, of course with it origin based in Japan. The candlestick will usually represent the movement of prices of financial currencies in the forex market over a specific period of time. Say for the 4hrs time frame, each candlestick on the chart will represent the activities of the market over four hours, for a 5mins time frame candlesticks formed on the chart will represent a five minute market activity, and so on.The forex candlestick is a concept more understood and put to use by technical analyst in the market. It enables them to carry out quality analysis with the use of the technical analysis system. It assist traders to get the representation of the market in real time and when used with other technical indicators can serve as a means of getting into high probability trades.
matters. For trading to make sense, money management defines the potential of a trade, with a risk-reward ratio of minimum 1:2 mandatory. Effectively, it means that for every pip risked, the reward should be at least twice the risk.
Elliott, for example, uses a complex logical approach to the market, interpreting various market cycles of different degrees. After a time-consuming process, labeling impulsive and corrective waves, the result is a trade respecting at least 1:2 as the risk-reward ratio.
Gartley uses Fibonacci ratios to find a trade at the bottom of a bullish or bearish trend. He developed a set of rules that results in a similar 1:2 risk-reward ratio for a trade.
All trading theories and concepts mentioned so far have a significant disadvantage. They are time-consuming.
It takes a lot of time for the market to form a pattern with the Elliott or Gartley theories. The same is valid for all classic technical analysis patterns: head and shoulders, wedges, flags, pennants, ascending and descending triangles, etc.
Many of the patterns took the Western world entirely by surprise. Morning and evening stars, bullish and bearish engulfing, not to mention the Doji candles, are only a few examples.
Yet, the Western approach already knew one pattern. A single-bar pattern, the pin bar was used since the early technical analysis beginnings.
Nowadays a candlesticks chart is the preferred way among Forex traders to look at a market. Hence, the pin bar became a single candle, but the principle to trade it are the same.
The equivalent of a pin bar in the Japanese approach is the hammer pattern. A hammer is a bullish pattern that forms at the bottom of a bearish trend. Hence, a reversal pattern, or a bullish pin bar.
However, a bearish pin bar at the end of a bullish trend has a different name in the Japanese approach: a shooting star.
Therefore, the equivalent of a bullish and bearish pin bar in the Western approach is the hammer and the shooting star in the Japanese technical analysis. But what makes a pin bar?
This single candle from candlestick pattern group is one of the most used in the field of forex trading due to its effectiveness even though it’s only a 1 candle pattern. The great thing about this is it shows the obvious psychology behind the formation which is the uncertainty and then rejection.
The pinnacle of strong rejection candle
The pinbar is just a 1 candle pattern and when you spot it near or at an important price level it can hint a possible reversal or retracement. This pattern is the easiest to spot because of its distinct formation which is a very small candle body (in comparison to the whole candle size) and then a very long wick. You can’t really miss this kind of candle when it appears. Practically impossible to miss this pattern after you read this. The pin bar is actually a doji candle with extreme wick size compared to the candle body. So, obviously not all candles with wick are pin bars. This pattern is specifically for spotting a strong rejection at critical horizontal support/resistance zone or diagonal S/R or dynamic S/R. Some traders even use this pattern in combination with other trading tools like pivot point or fibonacci and even harmonic patterns reversal zone. Those who focus their attention to picking tops and bottoms or even swing from retracements like using a pinbar. In fact, a swing point from a retracement usually provides the best signal to catch the trend when it finally resumes its move up or down. You can use this pattern as a reversal signal and also as a continuation signal.
The anatomy of a high quality pin bar signal
First, the look must be a specifically small candle body and particularly large wick (or often called shadow) on one side. The visual looks pretty similar to another candlestick pattern called the hammer pattern. The color bears little effect when it comes to pin bars because what we pay attention to is the fact that it forms a strong rejection from going to one side. If we are to put a ratio for the size of the body then we can safely say that the size of the candle’s body should not be bigger than 30% than the whole candle size from high to low. A pin bar is also a doji but a doji does not mean a pin bar and you should make this clear because both of them are sometimes very similar. Even though a doji pattern also signifies a hesitation and a rejection to a certain degree the pin bar is the ultimate rejection with less of a hesitation. Think of it as the last stand where the other side of the market is trying its ultimate effort to push back against the aggressor. In the case of a pin bar showing up near the support zone imagine it as the seller as the aggressor and the buyers as the defender.
HOW TO USE A PIN BAR?
Support and resistance. Candlestick patterns usually work better when they appear near or at significant support and resistance zones because a zone is a place of interest by the market participants and they are watching how the price will react to it when it’s near or inside the S/R area.
Retracement. Traders also watch how price react when it’s close to retracement levels as marked by fibonacci. Typically, they watch the major fib levels such as the 38% and 61% and although 50% is not a fib level they also watch this level. Some people also use pivot points for this purpose.
Flip areas. Pinbar can also work on flip areas such as SBR or RBS areas. SBR stands for Supply Become Resistance and RBS stands for Resistance Become Support. Those who trade using supply and demand also use pinbar and obviously, the idea is the same with how you use it on S/R.
Chart patterns. Using a pin bar on a chart pattern is a little bit more advanced because patterns are usually not ideally formed like those in the books or pdf and that is why it requires some level of discretion on the trader’s part. Pinbars usually are found at the tipping point of a pattern and there is a lot of pattern out there.
ENTRY METHOD
There are several ways in which you can enter the market by using a pin bar pattern and each of them has their own benefits depending on how you’re going to use it for.
Enter at candle close. During a really strong market you might see a slight market pause after price move and during this pause a pinbar might pop up and this is a good chance to enter the market because most of the time the market will just fly or drop after the pinbar shows up. That is why entering the market after the pinbar candle close is a good method to capitalize on strong market momentum. However, there is also a risk that you must consider when using this entry method because to be honest this is a very aggressive use of pinbar and especially if you trade intraday because the candle can move very fast during strong market momentum. You can check your chart about this to see how accurate this statement is.
Enter at market extreme. This method is actually very similar to the previous one but with a small difference where the previous method you enter immediately after the candle is closed in this second method you enter at the candle extreme by using a stop order. For example, you have a bullish pin bar where the body is a little bit near the center of the pin bar candle and so there is enough space for you to input a market order at pinbar candle’s high. If you trade intraday this might still work if the time frame is not too small because human’s reaction time might not be quick enough to respond if you are using 1 minute time frame but it’s still enough time if you use 15 minutes or 30 minutes time frame. This works much better if you use a big time frame such as H4 or the daily time frame.
Enter using a limit order. This is a bit more conservative when we consider the risk reward ratio because by this method we are actually looking to enter at the retrace of the pin bar candle. For example, we can seek to enter the market at 50% of the candle size or at fib 61.8 level.
EXIT METHOD
The 50% point of the pinbar. If your buy entry is very near the high of the candle then putting the stop loss at the 50% level of the candle is a good choice. This will make your stop loss very tight and it can provide you with some nice potential RR if the trend is indeed strong. Ideally, the RR should be at least 2 times what you risk or even more. Even though aiming for a big RR is good but you need to consider other things also and this is why 3R, 4R or 5R is acceptable but not more than that.
The extreme of the pinbar. This means if you enter a sell position on a pinbar candle then the stop loss should be put on the high of the candle and vice versa. This will avoid unnecessary loss that might happen and we’ve seen this more than enough where price will go to pick your SL at 50% and then go to your target profit of 5R. There is however, a downside of this SL method and that is your SL size is gonna be bigger than the previous method and this will also decrease your potential RR.
Please note that those are the standard ways of putting stop loss but nobody can tell you what to do, right? There is a ton of methods out there when it comes to stop loss and you just have to experiment with them if you want to use them with this pinbar strategy.
DETERMINING THE PROFIT TARGET
You can use various methods in regard to this topic because there basically exist multiple scenarios in the market and that’s what the market’s nature is, dynamic. So, there is really no one fixed method to determine your profit target. You can choose whichever method that you think is good for you. However, the main theme of any successful trading is the same and that is your profit target should be a multiple of your risk. The concept of RR is already widely known so just make sure that your take profit level is at least 1:2 or 1:3 and preferably more.
COMBINING PIN BAR WITH OTHER TOOLS
Pin bar is not an isolated pattern and it can be used in combination with other tools in forex trading but when used in combination, pinbar will usually act as the entry trigger.
Combination of moving average indicator and pinbar. Moving average can be used in virtually any combination with other tools and when used with a pinbar the moving average can act as the filter while the pinbar will take the position of an entry trigger. The simple usage would be if the trend is down (as indicated by the moving average) you should only look for a pinbar that will signal a sell position and you should ignore all the buy signals from the pin bar pattern that might appear along the way down. During a trending market this method will work good and you will get a lot of profit by doing this combination.
Combining fractal indicator with pinbar. While the moving average acts as the filter when combined with pinbar the story is different when you combine fractal with pinbar. The role is reversed if you use this method where the pinbar will act as the filter and the fractal will act as the entry. This means, you will only take a fractal trade when there is a pinbar in the fractal formation. Trading using fractal essentially means you should rely on a zigzag chart pattern because fractal can appear anywhere on the chart even if there is no apparent trend there. That is why you should trade zigzags (higher high or lower low).
You only need to read THIS ARTICLE to make money from forex trading,
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