Pin Bar Forex Trading Strategy

Pin Bar Forex Trading Strategy

Submitted by adil on Tue, 12/03/2013 - 14:47

The pin bar forex trading strategy is based on a candlestick pattern. Most professional traders prefer the candlestick version because when using the candlestick charts, the price actions are seen clearly. The pin bar formation consists of three bars that reflect price reversal patterns. This strategy is very effective and can be used on any timeframes whether long term or short term. Using the pin bar strategy to trade on a longer timeframe is considered more logical.

In an ideal situation, the pin bar reveals how a certain level or price point was rejected in the market. To fully understand the intricacies of this strategy, a trader needs to familiarize themselves with the pin bar formation.� �

Pin Bar Formation Characteristics

A pin bar formation is characterized by the following;

The pin bar should always have a long upper or lower wick/tail. The pin bar tail/wick/shadow shows the rejection or reveals the false break of a certain level.

�A pin bar contains an open and closed part known as the body/real body which is either coloured white or black depending on the day's outcome. When the close was higher than the open, the body is painted white or any other light colour. On the other hand, when the close was lower than the open, the real body is painted black or any other dark colour.

The pin bar's open and close should be near one end of the bar. It is even better if they are closer to the end.

The tail should always protrude from the surrounding price bars.

A pin bar length should always be 2/3 the total pin bar's length or more. The rest of the pin bar is expected to be 1/3 the total pin bar's length or less.

The formation comprises three bars including the left eye, the right eye and the nose. The left eye is always up; the nose bar opens and closes the left eye but normally bulges farther than the left eye's high.

The Different Pin Bar Formations

The most common pin bar patterns include;

Bullish Reversal Pin Bar Formation

In this formation, the left eye is a bar down whereas the nose bar opens and closes inside the left eye. However, its low should bulge farther than the left eye's low. The right eye is where the trading takes place. It is a common assumption that whenever you see this formation near a strong support level, the chances are that you'll be successful.

In the bullish reversal setup, the pin bar's wick points down to give an impression of the rejection of lower prices or support level. In most cases, the setup leads to a rise in price.

Bearish Reversal Pin Bar Formation

The bearish reversal pin bar setup shows rejection of higher prices or level or resistance. The pin bar's tail points up. More often than not, the setup usually results to a drop in price.

How To Trade Pin Bar Patterns

Proper trading requires an understanding of the pin bar formation concept. In order to be successful, only attempt to trade pin bars that are in agreement with each other's signal. When also trading, try to combine pin bar formations with support and resistance levels, Fibonacci retracement levels, trend lines or moving averages.