The pin bar is one of the most famous reversible candlestick patterns. You can use the pin bar in all different time frames, and it can be traded in many different markets, making it a very flexible trading strategy. This candlestick chart is a reversal pattern that usually helps you discover when new fluctuations are higher or higher. The low position is about to happen.
Pin Bar Candlestick Pattern
A pin bar is a kind of candle, it has a very large candle wick, and the body is very small. This pattern can be bullish or bearish, depending on how it is formed in price action.
The example below shows a bearish pin bar. The pin bar is formed when the price is trying to break higher. On the same trading day, shorts control and reduce prices in a reversal manner. This is why the large candle wick was created. This shows us that the higher prices are rejected and the bears can regain control after the initial breakout.
A spike is an inverted candlestick pattern that can lead to a general market reversal. What important to high-quality pin bars is where they are formed. As we discuss below, the best pin bars are within important market levels or obvious trends.
What are the Best Markets to Trade the Pin Bar?
The best markets to trade using the Pinbar strategy are those with a large volatility in price. The larger the price movement, the more likely the pin bar will trade and the more likely it will win large trades. Often, markets such as single stocks with large spreads are not suitable for pin bars. These are fast and free markets for Forex, cryptocurrencies, gold, silver, and more.
Bullish Pin Bar in Uptrend
Some of the high-quality pin bars you will trade are when there is a clear trend. In the example below, the price is moving in a clear uptrend. We can see from the price movement that the price reaches higher highs and lows in this trend. For a bullish pin bar, we want it to form at one of these swing lows in the trend.
The reason for this is because the pin bar is a reversal signal, and we want to enter the bullish pin bar and make a profit when the price reverses and rises with the trend. In this example, the price formed a bullish pin bar at the swing low. In an upward trend. So we can enter directly after the hook bar is completed, or we can use confirmation. One type of confirmed entry is when we look for a position where the price breaks out and is above the high nail, and go long when we see that we are entering. We can do this manually, or we can use a pending buy stop order to do this.
Bearish Pin Bar Setup
As mentioned earlier, the pin bar can be bullish or bearish, depending on where and how it is formed in the price movement. The difference between a bullish pin and a bearish pin is that a bullish pin
has a wick that rejects lower prices and a bearish pin. It has a wick that rejects higher prices. You will find that another good time to use this candle for high-probability trading is when you reject important levels in the market. Usually, these will be key support or resistance levels or dynamic moving averages.
In the example below, the price is moving towards a key resistance level. Then we can see that the price rejected this level and formed a bearish pin bar. This is our clue, the resistance level has been maintained, and the price may now be seeking to sell.
The example in the picture given below is a bearish pin bar.
Pin Bar vs Hammer
Although these two modes are often confusing, they are usually the same, but there is a key difference. Depending on how and where it is formed, a pin can be a bullish or bearish reversal signal, while a hammer is a bullish reversal pattern that is always formed at swing lows. Some traders will not call it a hammer, but call it a bullish pin bar. Both traders are correct, they are just different names for the same pattern.
How to Trade the Pin Bar Strategy
One of the easiest and most effective ways to start increasing odds in your favor is to trade based on clear trends. This works the same as when using the pin bar trading strategy. Follow the current flow instead of trying to push opposite it or choose the top or bottom of the market. The technique of using pin bar and trend trading is to find entries from important value areas and pivot points.
In the following example, the price is in a clear uptrend, and then we start looking for a bullish pin bar to establish a long position. When the price drops slightly in the value area and then a bullish pin bar reversal candle is formed, we may consider entering a long trade. We can go long immediately after the pin bar is formed, or set a pending buy stop loss to enter when the price exceeds the high point of the pin bar.
Using a Pin Bar Indicator
Pin bar candlestick patterns are often formed, depending on the number of time frames in your trading and the number of markets, it may be difficult to pay close attention to all these patterns. One of the best ways to ensure that you don’t miss any high-quality pins, using an indicator that will highlight on your chart in real-time and send you alerts. You can download and use some high-quality pin bar indicators for free on MT4 and MT5 to ensure that you will not miss any of these trades.