The Pin Bar forex trading method. The formation of a pin bar is in fact a trend reversal which consists of 3 bars The term Pin Bar is an abbreviation of the term Pinocchio Bar Let s take a look at how a pin bar is formed and how we can make money from it in the forex market. What is a pin bar. To be precise, a pin bar is the middle bar in a three-bar formation which can be found in a bar chart or a candlestick charts Typically, traders tend to prefer the candlestick chart version, which is considered to be visually superior for observing price action, however, we will initially discuss the formation of pin bars on a standard bar chart. Characteristics of a pin bar formation. The opening and closing of a pin bar are very close to each other and near one end of the bar The wick of the pin bar sticks out far beyond both bars 1 and 3 The longer the wick is, the better the quality of the formation. Examples of pin bar formations. Here is a daily chart of USD JPY currency pair, we see many pin bar formations that work very well. EUR USD Daily chart. Below is a daily chart of the USD CAD currency pair After a 3-week bullish streak, we see a perfect pin bar formation which leads to a significant trend reversal. Here is an example of a trending bull market where several profitable pin bar configurations appear The following EUR USD daily chart shows that pin bars that are taken along with the dominant trend can be very accurate and rewarding. How to trade a pin bar formation. To trade a pin bar correctly, you must first make sure that it is well defined see the above description. Then, try to only trade pin bars that are in agreement with another signal In general, pin bars that are traded in agreement with a dominant trend are the best Nevertheless, there are many profitable pin bars that occur within markets that are in a tight range or at major trend reversal levels Also, try to combine the pin bar formation with support and resistance levels, trend lines, Fibonacci retracement levels or moving averages. A pin bar formation is a trend reversal setup, so for a bearish bin bar formation such as the one featured in the small picture above, we will sell once the pin bar s low has been broken through and we will put a stop loss 1 pip above the pin bar s wick And for a bullish pin bar formation, we ll buy a break above the pin bar with a stop loss 1 pip below the pin bar s low. Pin bar formations with candlesticks. The formation of pin bars with candlestick charts is pretty much the same except for the terms that are used, which are slightly different A bearish trend reversal represented by the formation of a pin bar can be referred to as an inverted hammer, a doji, a tombstone, or a shooting star A bullish trend reversal with a pin bar formation can be called a hammer, a doji or a doji dragon. Pin bar formations can be a very profitable tool in your arsenal of forex trading setups The best pin bars setups are those that are in confluence with other signals such as support and resistance levels, the confirmation of a dominant trend, or other confirming signals Look for pin bar formations that match all of the characteristics listed on this page, leaving aside those you don t trust Pin bars work in all timeframes, but they are especially effective on 4-hour, daily and weekly charts. 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 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 Pinnochio s nose Let s 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 Let s examine a few pictures. DON T TAKE THESE. The above pic is an example of a perfect pin bar forming in the middle of consolidation Even if the pin bar s 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 support resistance You don t want to trade them in random price locations They should be forming on key areas of support resistance 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 London s 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. 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 You d 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 shouldn t be After all, it s better to be the master of one trading strategy than the jack of all now I m pretty sure you ve heard that before. Trading the pin bar alone holds many key advantages for us Lazy Traders It s a price pattern that s 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 I m glad you asked. What is the pin bar. Whether you know them low test bar or a shooting star, the chances are you ve probably already come across the pin bar, perhaps without even realising it. Depending on what book s you ve 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 half 50 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 half 50 ideally the lower third of the bar then we have a bearish pin bar reversal. It doesn t 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 tail wick visually representing this on the chart for us. A horizontal level. A trendline. A moving average. A psychological key 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, we ve 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. 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 All content on this website is intended for educational purposes only and The Lazy Trader 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 website s content, you fully accept and agree that this website offer s 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 website s 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 , Rob Colville Trading, its employees or directors or fellow clients The Lazy Trader and Rob Colville Trading are divisions of The Lazy trader Ltd. 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