In the last article, we discussed the daily engulfing candle to draw support and resistance zone and how we can use this level to trade on the intraday level. This article is about the Pin bar candlestick trading strategy. I think this will be a most interesting topic Because Most of the traders look for the Pin bar as an entry or exit signal but we will also use a pin bar as a support or resistance or SR Flip in forex.
What is a pin bar candlestick?
Pin bar candle consists of a small body and a long tail (representing rejection in price) and it refers to a reversal in price. In the lower timeframe, a pin bar consists of two candles which form a pin bar on the higher timeframe. The pattern of these two candles varies but the opening and closing price must be checked in a lower timeframe. View the attached image below for a clear understanding. There are two conditions to determine a valid pin bar candle.
- body of pin bar candle must be less than 25% of total candle size
- Tail or wick of the candle must be greater than 75%
Bullish pin bar
The bullish pin bar indicates the end of the bearish trend and the start of the bullish trend. A pin bar must form at the end of the bearish trend and a long tail of candle must show rejection of price from a support level. The Color of the bullish pin bar does not matter but you must keep in mind that bullish pin bar candle closing must be inside the range of the previous candle. if the price closes below the range of the previous bar then it is not a valid pin bar it is just a retest of price.
Bearish pin bar candlestick
Bearish pin bar indicates the end of forces of bulls and the start of a new bearish trend. A pin bar must form at the end of the bullish trend and a long tail of the candle must show rejection of price from a certain level or resistance level. Rules will remain the same for the bearish pin bar too like the closing of the pin bar inside the range of the previous bar. there is a psychological reason behind it.
Rules for a valid pin bar
- Body of pin bar candle must be below 25% of total candle size and Tail must be greater than 75%
- Pin bar candle must form at the end of a trend. it must not form within a range
- Closing of pin bar must be inside the range of the previous candle
A valid pin bar is always located at swing high or swing low point. A pin bar candle during a strong trend will work perfectly. View the location of the pin bar candle below graphically.
pin bar in forex
If you are thinking about the formation of the pin bar or why it causes a reversal in price then there is a valid reason behind the reversal in price after the formation of the pin bar. Let’s suppose the price of a certain forex pair is at a support level like 1.19000. Now the price has two options either to break this level and go more down or to bounce from this level and go up.
Here price will play a game. it will break this level to show retail traders that this level has been broken and they will sell the pair. but then the price will return to this support level abruptly and a pin bar will form. After this price will go up and retail traders will have to face stop loss. This is just a simple pin bar forex trading strategy used by market makers to capture more retail traders. This is the simple reason behind the formation of the pin bar.
forex pin bar trading strategy
Now come to the topic. We know Pin Bar is a great reversal signal and a daily Pin bar has much worth in the technical analysis. Pin bar shows the market has touched a level and then completely reversed. So the Real Game played here. There must be something interesting or a Big Guy was looking for this level. In trading, we have to follow banks, not retailers. We can use this footprint for our benefit.
First, let me show you which candle is a pin bar and which is not because many people think of a Doji as a pin bar in forex.
Look at the above chart Now you can distinguish between PinBar and Doji candle.
Pin bar strategy
How can we use this candle for our benefit? Many Traders use this candle as an Entry or Exit But we can use this candle to act as a strong Support and Resistance Level and SR flip Level. PinBar low point and PinBar High point act as strong support and resistance. After drawing support and resistance levels, we will trade a pin bar setup from these levels only. pin bar forex trading strategy is a very simple and effective technique.
Let me show you on the chart
I have shown you the main reason for writing this article. How can we use Pinbar pattern to draw key levels ( reversal points) for our benefit? This Article is going to improve your trading to a Next Level in forex.
In short, we just have to watch for a good pin bar in history and draw a horizontal line on its tip. This will act as a key level. you can use these levels to trade with Trend.
Pinbar is the most powerful candlestick pattern.
Note: All the viewpoints here are according to the rules of technical analysis. we are not responsible for any type of loss in forex trading.