IDENTIFYING THE VALID PIN BARS
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In general, Pin Bars are two types. The bullish pin bar, and the Bearish Pin bar.
Bullish Pin Bar signals Long or Buy trade entry, and a Bearish Pin Bar signals the Short or Sell trade entry.
Every pin bar consists of a real body or a head. And a tail or long shadow.
The real body is the difference between the opening price and closing price of a candle. So, if the closing price is higher than the opening price of a pin bar, then this types of pin bars are called the bullish pin bar. And if the closing price is lesser than the opening price, then this types of pin bars are called the bearish pin bar.
A bullish pin bar is the sign of buyer’s strength and a bearish pin bar signals the strong selling
pressure of a certain security.
PIN BARS STRENGTH ANALYSIS
Based on the formation of pin bar, you will find 3 types of valid pin bars in a price action chart.
1 Standard Pin Bar: The first type of pin bar is the standard pin bar, this types of pin bars contains a real body and a long tail. They are the strongest than other two pin bars. You will see no extra shadow or wicks attached to the real body of this types of pin bars.
2 Pin Bar with extra shadow: The second types of the pin bar, is the pin bar with a nose or extra wick attached to the real body. These pin bars are also called as the hanging man. This types of pin bars shows less strong market momentum than the standard pin bars. The nose above or below the real body indicates the opposite directional force and hence shows weakness of the pin bar.
3 Pin Bar with no real body: This type has no real body but a tail. That means the opening price and closing price of the pin bar is same. The signal strength of this types of pin bar is very week. But if you can find a strong bullish or bearish candle after these types of pin bars, then this patterns gives a very strong trading signal.
BULLISH PIN BAR TRADING METHOD
At first I will show you the pin bar trading method for Long/Buy trade position.
For Buy trades with pin bar, find a bullish pin bar at the bottom on a price action chart, and then place your long trade entry after the closing of the pin bar. Because bullish pin bar at the bottom indicates the potential bullish momentum and decreasing selling pressure. This setup gives very strong bullish trade signal and high probability of winning a trade.
Set the stop loss at 3 pips below the pin bars low, and then set the profit for 2x times
the size of the stop loss size, which means if the stop loss is 50 pips then we aim for
profit for at least 2×50=100 pips.
Real Example: In the above chart, you can see that we have two bullish pin bars at the bottom of a price action chart. So we traded long after the closing of the pin bars. Then set the stop loss at 3 pips below the pin bars low/tail. And the take profit is aim for at least two times the size of the stop loss size.
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BEARISH PIN BAR TRADING METHOD
Now I will show you the pin bar trading method for Short/Sell trade position.
For sell trades with pin bar, find a strong bearish pin bar at the top on a price action chart, and then place your short/sell trade entry after the closing of the bearish pin bar. Because bearish pin bar at the top indicates the decreasing buying pressure and upcoming bearish momentum. This setup gives very strong bearish trade signal and high probability of winning a trade.
Set the stop loss at 3 pips above the pin bars high or upper tail, and then set the profit for 2x times the size of the stop loss size, which means if the stop loss is 50 pips then we aim for profit for at least 2×50=100 pips.
Real Example: In the above chart, you can see that we have two bearish pin bars at the top of a price action chart. So we traded short after the closing of the bearish pin bars. Then set the stop loss at 3 pips above the pin bars high. And then for take profit, aim for at least two times the size of the stop loss size.
PIN BAR - THE SUMMARY
Now lets have a final look of the Pin Bar Trading Strategy –
At first, identify a pin bar candlestick
pattern in a price action chart. Find a
bullish pin bar at the bottom on a
chart, or find a bearish pin bar at the
top on a price action chart.
Then analyze the strength of that pin
bar to predict the overall market
sentiment. Try to avoid trading in the
weak pin bar candlestick patterns.
If you find a strong bullish candlestick pattern at the bottom on a price action chart, then after the closing of that pin bar, place your long trade entry at the new candle.
Set your stop loss at 3 pips below the pin bars low or tail. And then aim for profit for at least the double size of the stop loss size.
On the same way, if you find a strong bearish candlestick pattern at the top on a price action chart, then after the closing of that pin bar, place your short trade entry at the new candle.
Set your stop loss at 3 pips above the pin bars high. And then aim for profit for at least the double size of the stop loss size.
