The Pin Bar: One of the Most Powerful Price Patterns in Forex Trading Updated: April 24, 2016 at 11:34 AM Are you tired of trying to be a scalper and continually getting scalped by the market Perhaps the quick action of the 1-Minute and 5-Minute charts is a bit too much. In fact, trading those lower timeframes can be very difficult, even for the most seasoned professional traders. One of the easiest things many new traders can do to increase their winning percentage and profits is to simply step back and begin trading on higher timeframes such as the Daily, 4 Hour, and 1 Hour Charts. By stepping back and trading off these higher timeframes, new traders will find a much less stressful style of trading as there is no need to sit in front of the computer and watch tick by tick as price moves against you a few pips, and then for you, and then against you yet again. The transition from trading lower timeframes to higher timeframes can be a bit difficult at first for newer traders. First of all, higher timeframes will require more patience. Price pattern set-ups will not occur as frequently, and when they do, profits may not come as fast. Generally, trading off of higher timeframes may not be as exciting as trading tick-by-tick on the lower timeframes. However, common technical analysis tells us that signals off higher timeframes tend to be more reliable than signals off lower timeframes because the higher timeframe signals are produced by a larger set of data. In this article, we are going to discuss one of the highest probability trading strategies in the FX Market-the Pin Bar. Pin Bar History amp Definition In his book Pring on Price Patterns, Martin Pring discussed a candlestick formation he coined the Pinnochio Bar. The Pinnochio Bar, or pin bar, tends to offer very reliable reversal signals when identified and traded properly. Before we go on, here is a picture of a pin bar: Pring used the original term Pinnochio Bar because this candle is like Pinnochios nose. Lets assume the picture above is a 1 Hour Candlestick. As price moved up during the 1 Hour period, it appeared that bulls were in complete control of the market, but then at some point during this 1 Hour period, sellers were able to come in with great fury and not only hold the buyers off from pushing price higher, but they actually came in and took complete control of the trading period. By the end of the 1 Hour session, sellers had completely erased all of the gains that buyers had made, and they were even able to push price below the period open so that the candle closed red, which proves that sellers are now completely in control of the market. The psychology behind the candle is that price lied to us. It tried to convince us it was moving higher, but in reality, price moved much lower by the end of the session thus, the name Pinnochio, or pin bar. These pin bars are a powerful reversal signal when they form in the correct manner and location. Not All Pin Bars Are Created Equal The best pin bars will close below the open if the wick is to the upside, or above the open if the wick is to the downside. In the picture above, you can see that the candlestick closed the 1 Hour trading session below the open thus, it closed as a red candle. That is what you want to see. If there has been a nice move up in price and the pin bar forms at the top of the move with a big wick to the upside, you want the candle to close red, as in the picture above. However, if price has made a nice downmove and a pin bar forms at the low of the move, with a big wick to the downside, then the body should close green. If a pin bar does not quite do this, it can still be okay, but be assured that the very best ones will close in the manner just described. And always remember, trading only the best pin bars will offer you the highest probability of trading success. The body of a pin bar must be no more than 20 of the measurement of the body to the tip of the wick . Therefore, if the body is 8 pips and body to end of wick is 25 pips, the candlestick would not be classified as a perfect pin bar. If the wick to body is 100 pips, then the body should be no more than 20 of 100 pips, or 20 pips. If it is a few pips more, it can be okay, but is should be very close to 20 pips or less. The nose should not be very long at all. If the nose is to long, the candlestick will form what is called a doji, which is a candlestick with a small body and equal length wicks on each side. A perfect pin bar will have a very long wick on 1 side and a very small wick, or even no wick, on the other side. Location is of extreme importance. Pin bars should not be traded in the middle of consolidation or a sideways market. Oftentimes in consolidation, pin bars will form, but these signals are much less reliable. Ideally, there should be no candles to the immediate left of a pin bar wick. Instead, there should only be open space. Lets examine a few pictures. DONT TAKE THESE. The above pic is an example of a perfect pin bar forming in the middle of consolidation. Even if the pin bars form is perfect, as the one in the above pic is, it has to form in the proper location. This one does not, so you should not trade it. You must find pin bars that form at the top and bottom of moves. In the above picture, you can see that the pin bar forms at the bottom of an extended move. This is where you want a pin bar to form. The next important aspect of the pin bar is making sure it forms at a key area of supportresistance. You dont want to trade them in random price locations. They should be forming on key areas of supportresistance as identified through common technical analysis. They should be confirming a price reversal. Entry and Exit Entry on is always on the break of the nose by 2-3 pips and the stop loss is always placed 2-3 pips beyond the tip of the wick. Pin Bars are not a magical formula that will produce endless pips with no effort. They are simply a price pattern that when traded properly can combine with other forms of technical analysis to provide very high probable set-ups in the FX Market. Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you. Meet Londons LAZIEST TRADER Call trading from as little as 10 minutes a day work THE Laziest fund trader in London, Rob Colville, has mentored over a thousand people worldwide to trade effortlessly and profitably in his style. You, too, can do the same. Grab Your Free eBooks and Videos gtgtgt to my Newsletter and claim your FREE Forex Trading videos and 5 Rapid Ways To Become Highly Profitable in Forex Trading eBook Forex Trading Trading Pin Bar Reversals Pin Bar Reversal Strategy What if I told you that you could become a profitable trader from trading no more than just one trading strategy Youd probably feel pretty surprised, right Some of you may even feel outright offended But let me let you into as small secret. Trading just one price action based pattern represents the majority of the trades we take today. and this price action pattern is the pin bar. Surprised You shouldnt be After all, its better to be the master of one trading strategy than the jack of all. now Im pretty sure youve heard that before Trading the pin bar alone holds many key advantages for us Lazy Traders . Its a price pattern thats celebrated as one of the most popular price action based patterns both to trade and to teach. Not only can we use the pin bar as an efficient entry or launch pad to taking highly profitable, long-term swings in the market . they also act as highly reliable indicators in telling us where the market it likely to head next. They have been and will always be a firm family favourite with Lazy Traders . But what are they, when do we trade them and how Im glad you asked. What is the pin bar Whether you know them low test bar or a shooting star, the chances are youve probably already come across the pin bar, perhaps without even realising it. Depending on what books youve read and who you subscribe to, you may have heard them referred as: Low test bar (bullish) Long wicked hammer (bullish) Morning star (bullish) Long wicked doji (bullish ) High test bar (bearish) Shooting star (bearish) Evening star (bearish) Long wicked gravestone (bearish) Regardless of what you know pin bars to be, the good news is that they tell us the exact same thing and we can trade them in the exact same way . no problem A pin bar is a price action pattern which you can see on any timeframe which tells us that a certain price or technical level has been sharply rejected . If this is the case, then they can give us a reliable heads up with what happens next. If we have a bearish pin bar reversal as a technical level, then we have probabilities stacked in our favour that price is likely to fall. If we have a bullish pin bar reversal at a technical level, then we have a indication that price is likely to head upwards next . The body of a pin bar Pin bars are best viewed as in Japanese candlestick form on the chart, although you can also see them lucidly using OHCL (Open high low close) charts too. They are characterised as having a long tail, also known as the wick with the open and close, known as the body, in the upper or lower half of the bar. If the open and close of the bar is in the top half50 (ideally the upper third of the bar) then we have a bullish pin bar reversal . Conversely, if the open and close is in the lower half50 (ideally the lower third of the bar) then we have a bearish pin bar reversal. It doesnt matter what the colour of the bar is. If you have a bullish pin bar reversal as a seller (red) bar . then it is still bullish as a price pattern. Conversely, if you have a bearish pin bar reversal which is a buyer bar (green) . then it is still a bearish price pattern. That said, generally bullish pin bars are green buyer bars and bearish pin bars, red seller bars. When to trade pin bars When it comes to trading pin bars, a pin bar on its own is simply not enough . We are only interested in actually trading pin bar reversals which are rejecting a meaningful technical level. This is because pin bar reversals by their very nature reflect a sharp rejection in price with the tailwick visually representing this on the chart for us. A horizontal level A trendline A moving average A psychologicalkey number A Fibonacci retracement level A weekly or monthly pivot point Context of the market Fortunately for us, the versatility of the pin bar pattern means we can trade in both trending and range-bound markets . But we do want to be on the right side of the market, regardless of what market we are in As technical traders, trading probabilities based on what we see on the chart, we want to make sure we have as many proabilities on side as possible. Having the market on our side helps. In fact, it helps a lot All we have to do is trade with the trend by buying in an up-trend or selling in a down-trend . Does it get more complex than that Not really. If the market is range-bound then we can simply sell at the top of the range and buy the bottom . The pin bar serves as our confirmation or activator bar. It will be our entry into the trade. Trading the pin bar in an up-trend Trading the pin bar in a down-trend Trading the pin bar in a range-bound market We will trade the bullish pin bar if the context of the market is bullish (ie: in an uptrend or buying the bottom of the range ) and the bearish pin bar reversal if the context of the market is bearish (ie: in a down-trend or selling at the top of a range) . but only if we have a technical level(s) supporting the direction. In the example above (GBPCAD daily chart) you will see that our technical arguement for the sell at the top of the range followered by the buy at the bottom is governed by the key levels obstructing price from going any further. The pin bar gives us the confirmation that price where price is likely to go thereafter. A bullish pin bar price likely to go up. A bearish pinbar price is likely to go down. How to trade the pin bar Select the best and leave the rest As you can probably imagine, there are pin bars and there are pin bars. As traders running our trading account as a business, we should only select the bes t. We owe it to our bottom line. Now, weve talked about trading only with the trend and having as many technical reasons on our side as possible. But what if we could take it one step further to really eliminate some of the gunk Well, we can The best pin bars are the ones where their tail is bouncing off and rejecting a price where no other preceeding bars have reached after a pullback. Not only does this reflect a sharp and decisive rejection and that price wants to continue with the over all trend, it lets us place our stop loss in a far safer place and minimise the chances of being stopped out for a loss. The example above on the left reflects the best kind of pin bar, with its tail rejecting an independent price after a pullback. We love these However, although the example on the right has pin bars - they are in a choppy range and it is more likely that we will get stopped out as the tail is not rejecting an independent price. Conclusion Pin bars are highly versatile and can be profitably traded both in trending and range-bound markets. They are an efficient entry to long term moves with high profit potential and can be traded on any timeframe and on any instrument in exactly the same way . The best set-ups occur when they reject technical levels before they typically head in the direction o f the prevailing trend. If you decide to trade pin bars exclusively and simply ditch everything else then you will be head and shoulder s above the majority of people who flock to the market. Talk to any successful trader, read their autobiography or blog and they will have one thing in common they stick to trading one or two strategies at the most. You can learn how to trade advanced pin bars in my forex training course in addition to how to managing the trade and profit targeting. You May Also Like. Disclaimer Disclaimer: All content on this website is intended for educational purposes only and The Lazy Trader (TheLazyTrader) will not be held responsible for any losses incurred. The information of this website is general advice only and does not take individual circumstances into account so do not trade or speculate based solely on the information provided. But viewing and participating our and the websites content, you fully accept and agree that this website offers general advice only and that trading the financial markets is a high risk activity and should understand that past performance does not indicate future performance and that the value of investments and income from them may go up as well as down, and are not guaranteed. No representation is, has or will be made that any website visitor, client or content viewer will or is likely to achieve profits similar in any way to those discussed on this website or this websites subsidiaries. You will not hold any person or entity responsible for any losses or damages resulting from the general advice provided here by The Lazy Trader, TheLazyTrader, Rob Colville Trading, its employees or directors or fellow clients. The Lazy Trader (TheLazyTrader) and Rob Colville Trading are divisions of The Lazy trader Ltd. Risk Warning Forex, Futures, Options and such Derivatives are highly leveraged and carry a large amount of risk and is not suitable for all investors. Please do not trade with more money than you can afford to lose. All content (news, views, analysis, research, trade ideas, commentary, videos or articles) on this website or this websites subsidiaries does not constitute as investment advice. copy Copyright 2012 The Lazy Trader (TheLazyTrader) - All Rights ReservedForex Swing Trading Strategy 10:(Pin Bar Trading Strategy) The Pin Bar Trading Strategy with is a great forex trading strategy for swing trading and I will tell you why. If you just go over you charts and just look at pin bars, you will see how profitable this forex chart candlestick pattern can be. You see, the pin bar, is one of the most high probability reversal candlestick patterns and if you can identify a pin bar on your forex chart and secondly knowing where and what location on the chart it is occurring, you can make a great swing trade. The pin Bar Trading Strategy relies on the Pin Bar Formation. The Pin Bar is a price action reversal pattern and when it forms, it clearly shows that the price was rejected by the market at a certain price level or point. WHAT IS THE PIN BAR The Pin Bar is very different from other reversal candlestick chart formations because it is a barcandlestick with a long tail or wick, a very short body. The name itself (the pin bar) refers to using a bar chart but I prefer using candlestick charts but lets keep the name pin bar as it is, ok ANALYZING THE PIN BAR IN DETAIL This is a more detailed analysis of the pin bar, if you dont like this, you may skip down to search for the Pin Bar Trading Strategys Rules. For A Bearish Pin Bar Formation: the very long tail tells you that the bulls took over and pushed the price a very long way up to form a high, but that high was not maintained. The bears came with such a great force and took over and pushed price down all the way, wiping away all the price gains made by the bulls. The price fell, made a low and then close a little bit below the opening price in the red. so what does this mean It means the when you see such a bearish pin bar formation, you should be very alert that the bears are now most likely taking over the market and will continue to push price down. For A Bullish Pin Bar Formation: a bullish pin bar formation is the exact opposite of the bearish pin bar formation: the long tail tells you that initially, the bears took control of the market and pushed the price all the way down to make a low but this low was not sustained. After the low was made, the bulls took over with such ferocity and force and pushed the price all the way up, completely wiping all the downward price moves made by the bears and making a high and finally closing a little bit below the high in the green. interesting huh So as a swing trader, what should you get from this Well, it means that when you see such a candlestick formation, you should be alert now that that bulls are most likely taking over the market and will continue to push price up. BEST LOCATIONS TO TRADE THE PIN BAR This is one very important criteria if you are looking to trade the pin bar: you just cannot trade all the pin bars you see. It does not make any sense at all to trade all the Pin Bars You see because of one very simple reason: the location of where the pin bar forms impacts you probability of success. So the best places to trade pin bars are these: Fibonacci levels of 31.8, 50 amp 61.8 Major support levels Major resistance levels traders action zone pivot levels trendline bounces. HOW TO TRADE THE PIN BAR FORMATION Wait and watch for pin bar to form on the levels above like fibonacci levels etc..that Ive listed above. and depending on whether its a bullish or bearish pin bar you will have to place a pending sell stop order 3-5 pips below the low of the bearish pin bar and place a buy stop order 3-5pips above the high of the bullish pin bar. Place your stop losses on the other side of the pin bars of the same distances as you placed the pending orders, that is, 3-5 pips above the high if its a sell stop order and 3-5 pips below the low if its a buy stop order. for take profit targets, use previous swing high pointspeaks or swing low valleysbottoms as you take profit targets. while the price moves favorably, you have to lock in your profits by using the trailing stop technique where you move and place behind subsequent decreasing swing high pointspeaks for a sell order and behind increasing swing low pointsvalleysbottoms for buy order. In this way, whatever happens, you have locked profits for that trade and if the market moves against you, you would have still made a profit anyway. BEST TIME FRAMES TO TRADE THE PIN BAR I believe the larger timeframes are the best timeframes to trade the pin bar. So you should be looking at pin bars in the 1hr, 4hr and daily timeframes. If you are trading in the 1hr, dont be just focused only on 1hr charts, check in the 4hr charts as well because sometimes you will notice that you may not see a pin bar in the 1hr chart but in the 4hr chart, a pin bar may be forming which you will not see because you are so focuses on looking at one hr charts only. What Im saying is learn to use multi-timeframe chart analysis. This is an essential trading skill all forex traders should know. So there you have it, the pin bar trading strategy. See if you can use it today Leave a Reply Cancel ReplyThe 2 Bar Reversal Explained By: Johnathon Fox The 2 Bar Reversal is a Price Action formation that can be found on any time frame on most markets. This Price Action signals is as it names states is a reversal signal. Being a reversal signal itrsquos key that traders look it to form at pullbacks to enter and not as a continuation play. A 2 Bar Reversal is basically just a Pin Bar reversal but formed over 2 sessions worth of data. The psychology behind both the 2 Bar and the Pin Bar are both the same. With both signals we are looking for price to go in one direction before faking traders out and snapping back quickly in the opposite direction. 2 Bar Reversal Structure The 2 Bar Reversal is made up of 2 candles or bars. For a bearish 2 Bar reversal the first bar must go up and close near the sessions highs. The second bar must then open and snap back lower showing rejection of those previous highs and faking traders out. The candles below show what this description will look like on a chart. Bearish 2 Bar Reversal Examples of 2 Bar Reversal Found On Chart The best 2 Bar Reversals are normally found when the market is in a strong trend and a pullback occurs to a logical area of support or resistance. It is at these logical areas of supply and demand that traders can look for the 2 Bar reversal as entry signals with the trend. Example 2 Bar Reversal With Trend 2 Bar Reversals can be traded in all sorts of markets. Because 2 Bar Reversals are reversal signals you will often find they are the signal that changes the direction of the trend. 2 Bar Reversal Changes Strong Trend All traders will be able to spot and identify this very easily identifiable Price Action signal on their charts. Just because a trader spots a 2 bar Reversal however does not mean they should trade it. Not all 2 Bar Reversals are created equal and some have much higher percentage chances of working out than others. Johnathon Fox is a professional Forex and Futures trader who also tutors and mentors aspiring traders worldwide. Johnathon teaches a very useful method of Price Action trading and has a knack for helping traders become consistently profitable. Risk Disclaimer: DailyForex will not be held liable for any loss or damage resulting from reliance on the information contained within this website including market news, analysis, trading signals and Forex broker reviews. The data contained in this website is not necessarily real-time nor accurate, and analyses are the opinions of the author and do not represent the recommendations of DailyForex or its employees. Currency trading on margin involves high risk, and is not suitable for all investors. As a leveraged product losses are able to exceed initial deposits and capital is at risk. Before deciding to trade Forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite. We work hard to offer you valuable information about all of the brokers that we review. In order to provide you with this free service we receive advertising fees from brokers, including some of those listed within our rankings and on this page. While we do our utmost to ensure that all our data is up-to-date, we encourage you to verify our information with the broker directly. Risk Disclaimer: DailyForex will not be held liable for any loss or damage resulting from reliance on the information contained within this website including market news, analysis, trading signals and Forex broker reviews. The data contained in this website is not necessarily real-time nor accurate, and analyses are the opinions of the author and do not represent the recommendations of DailyForex or its employees. Currency trading on margin involves high risk, and is not suitable for all investors. As a leveraged product losses are able to exceed initial deposits and capital is at risk. Before deciding to trade Forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite. We work hard to offer you valuable information about all of the brokers that we review. In order to provide you with this free service we receive advertising fees from brokers, including some of those listed within our rankings and on this page. While we do our utmost to ensure that all our data is up-to-date, we encourage you to verify our information with the broker directly.
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