Pin Bar, which is short for ‘Pinocchio Bar,’ is a single candlestick setup that clues price action traders into potential reversals in the market. A pin bar candle is an elongated wick that ‘sticks out’ from price action. Traders will usually look for one-sided wicks that are two times the size of the body of the candlestick.
I. Identify pin bar candles
The pin bar consists of 3 parts as shown in the picture:
– Shadow >= 2/3 Total:
+ For example: Total = 100 pip, Shadow = 100*2/3 = 66 pip
– Body: The smaller the Body the better and lie near the Nose.
– Nose: Nose as small as possible, may not have.
II. How to form a pin bar candle
– Pin bar price increases are formed when: when prices break out of a key support level, and a large amount of buying leads the price back above that support level. with pin bar reduction is the opposite.
– The Pin bar is formed because the Exchange Funds or Banks place a large number of transactions there.
– Usually, appear at support or resistance levels.
– This model works best in large time frames D1, W1.
– And we will trade in the trend of Pin Bar.
We will have two ways of dealing with Pin Bar Candles
Depends on market perception and condition
I.Way 1: Break of the Pin bar nose entry.
– Enter the order when the price breaks the Pin bar.
II.Way 2: 50% Pin bar.
– We can wait for the price to return to 50% of the Pin bar for sale or sell at resistance
III. Set SL and TP
Part 3 will guide identifying real Pin bar and fake Pin bar
Real Pin bar and fake Pin bar
In fact, it is very difficult to make a beautiful Pin bar like Part 1. We have the following criteria to choose a Pin bar to trade:1. Size of Pin bar: The Pin bar should not be too small compared to the previous candles because of its very low efficiency.
2. Price and Time: Pin Bar formation time is very important, it determines whether the market really goes in the direction of the Pin bar or a fake breakout + The following is a fake Pin bar.
+ A Pin bar for good signals must be like this
3. Test areas of Support and Resistance: when the Pin bar has tested the area and overcomes it, it shows that I have tested its price and the selling power is not enough to get a lower price.
Checked the area, the selling was not enough, and the price started to go up.
If the area has not been tested yet, it is likely that prices will fall below and then increase. If the price drops will touch Stop Loss
4. Trend combination:
This is very important because the transaction never goes against the trend of the price
After considering the factors, we see this is a nice Pin bar to sell, but why touch stop loss. Let’s see the price trend.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.