Pin Bar Strategy – How To Trade It

 

Today we kick off our three-part series on price action analysis by taking a close look at the pin bar strategy and how to trade it. We’ll first  define the pin bar take a look at its anatomy and  then show illustrations of how to trade pin bar setups But first:

A Little Introduction To The Pin Bar Strategy

The pin bar pattern represents a  strong rejection and reversal of price.  The rejection usually occurs at a very crucial stage in market activity. The good news is once you familiarize yourself with this pattern you stand the chance of laughing all the way to the bank. The first question we need to ask ourselves is:

What Is a Pin bar?

Well, the pin bar is a thin bar with  the following attributes:  a long upper or lower tail, wick or shadow, and a smaller body or real body. The pin bar also belongs to the candlestick family(We’ll touch on candlesticks real soon)- very popular with forex traders because they’re easy on the eyes as far as price action goes.

 

Anatomy of the Pin Bar 

• The  pin bar has a long tail or wick as it’s popularly known.. As indicated in the above graphic,  the tail is the pointed part of the bar that resembles a tail and which indicates rejection or false break of a level.
• The body represents the area between the open and close of the pin bar. And it’s usually colored white or another color, when the closing price is higher than the open price. However, if the body color changes to a darker color, or some other color, then the closing price  becomes lower than the opening price.
• The open and close of the pin bar should be close to or equal to the same price.
• The tail, popularly known as the shadow protrudes fr

• The tip of the tail is referred to as the nose.
  • The  pin bar has a long tail or wick as it’s popularly known.. As indicated in the above graphic,  the tail is the pointed part of the bar that resembles a tail and which indicates rejection or false break of a level.
  • The body represents the area between the open and close of the pin bar. And it’s usually colored white or another color, when the closing price is higher than the open price. However, if the body color changes to a darker color, or some other color, then the closing price  becomes lower than the opening price.
  • The open and close of the pin bar should be close to or equal to the same price.
  • The tail, popularly known as the shadow protrudes from the  other bars. For your sakes, you’ll be better off with a longer bar a

Now we’re gonna see illustrations of how to trade pin bar setups with respect to bullish and reversal  formations.

Bullish Reversal Pin Bar

In a bullish reversal set up, when the pin bar’s tail points down, it suggests rejection of prices or a level of support(either support or resistance).  This triggers an upward trend or rise in price, and when that happens, it’s time to make a buying trade.

Bearish Reversal Pin Bar

The pattern on the right of the bullish reversal pin bar is the bearish reversal pin bar. This the complete opposite of the bullish reversal pin bar. Here prices are rejected at the level of support, resulting in a  drop in price. This triggers a downward pattern, and when that happens, it’s time to sell.

 

How To Trade Pin Bar Strategy

If you want to make serious money with the  pin bar strategy, make sure it’s well defined. Refer to the characteristics  of the pin bar we discusssed earlier if you find yourself in sixes and sevens.Why do I say so, because not all pin bar patterns look the same. So it pays to trade the pin bar patterns that satisfy the above characteristics. But just to clear any clouds swirling in your head, let me show you what a defined pin bar looks like.

This is a pin bar formation in a downtrend. As the two arrows sugest, the pin bar has a long narrow wick and a small body. So keep that in mind when looking out for  the pin bar pattern.

Also,make sure that you trade pin bars that display confluence with another factor.  Sure, some of you are scratching your heads like “What does he mean by confluence.Well, confluence is where tow or more levels come together on the chart.  On    The alignment of these levels creates opportunities for trade signals. A classic example of pinbars displaying confluence is at the support level where you have multiple trade signals long the line of support. Let me show show you a classic  example of confluence of factors along the line of support

This,ladies and gentlemen, is a classic example pin bars displaying confluence with another factor along the lines ofsupport and resistance. The three arrows represent trading signals along these two lines. When such a convergence, occurs,  prepare to ring the cash register.If you want to  sink your teeth further in multiple confluence of factors  stop by  my Something Called Multiple Confluence of Factors Post.

 

That’s a wrap on “Pin Bar Strategy – How To Trade It.” Tomorrow we’ll touch on the second of our trade setups- Fakey Set Up. I’m sure you’re looking forward to that. Till next time take care.

Interested in getting into price action trading and a career in forex trading?

Read the following posts: Why Forex Trade Is So Popular and What Is Price Action?

 

Looking to open a forex trading account?

Sign up with Easymarkets

D0wnload Free eBook on Understanding Forex Analysis

Name(required)

Email(required)

Website

Comment(required)

Name(required)

Email(required)

Website

Comment(required)

 

 

 

 

 

 

Advertisements