If you’re interested in forex trading, you might have heard about the Pin Bar Forex trading strategy. This technique involves identifying certain candlestick patterns that can help traders anticipate future market movements. It’s a popular strategy, and one that’s definitely worth learning about if you’re serious about trading
This guide will provide a detailed examination of the pin bar candlestick pattern, including its formation and the best trading positions for this type of reversal candlestick pattern.
WHAT DOES A PIN BAR LOOK LIKE?
The Pin Bar stands out from other reversal candlestick patterns because it is easy to spot. It has a long tail (wick or shadow) and a small body which shows that the price was rejected at a specific price level.
2 Types of Pin Bar Candlesticks
Bearish Pin Bar Formation:
For these, we see the extended tail showing that the bulls initially controlled the market, pushing the price upwards to form a high. The bears take over driving the price downwards and erasing all the gains made by the bulls.
When you spot a bearish Pin Bar, it’s crucial to be on high alert, as this indicates that the bears are now dominating the market and will likely continue pushing the price down.
Bullish Pin Bar Formation:
The bullish Pin Bar is the opposite of the bearish candlestick. The long tail indicates that the bears first controlled the price by pushing it down and forming a low. The bulls then gain control of the currency pair and push the price upwards and wipe out all the gains that the bears made.
When you see a bullish Pin Bar, you should be prepared for a potential reversal, as this indicates that the bulls could be taking charge and may continue driving the price up.
Best Locations For Trading Pin Bars
Focusing on the location of the Pin Bar pattern on the chart is important for achieving success in Pin Bar trading. Not all Pin Bars offer good trading opportunities since pin bars can appear anywhere on the Forex chart, so focus on the following high-potential zones:
- Fibonacci levels: 31.8%, 50%, and 61.8%
- Major support and resistance levels
- Trader action zones – areas between 2 or more moving averages
- Trendline bounces
Now that you’re familiar with what a Pin Bar looks like, the meaning of the pin bars, and the best locations to find them, let’s look at the rules of a pin bar trading strategy that focuses on price reversals.
Pin Bar Trading Strategy
Pin bars are a useful candlestick pattern that reveals who is currently controlling the price, so they can be used with almost any trading approach.
Scan Forex Charts
Scroll through the currency pairs you like to trade and look for a pin bar candle that is forming at any of the high-potential levels mentioned above.
Identify The Pin Bar
In an uptrend with a pullback in place, you are looking for a bullish pin bar to catch the reversal back in the trend direction.
If the price is rallying while in a downtrend, look for the bearish pin bar to show up.
Bullish Pin Bar Trade Entry
Look to trade a break of the high of the pin bar as your trade entry. Look for a 3-5 pip buffer over the high of the candlestick so there is some price movement in your direction.
Bearish Pin Bar Entry
We want to place a sell-stop order 3-5 pips below the low of this reversal candlestick.
Bullish and Bearish Stop Loss Location
Your initial stop loss will go on the opposite side of the entry using the same 3-5 pip buffer
One way to determine take-profit targets is by using previous swing highs or lows. Once the price starts moving in your direction, you can consider locking in profits by using a trailing stop technique.
To do this, adjust and position your stop loss behind lower swing highs (if selling) or higher swing lows (if buying).
By following a trailing stop technique, you can lock in profits regardless if the price moves against your position. Consider using the swing high/low level as soon as the price forms one.
Does the Pin Bar strategy prove to be effective?
The Pin Bar strategy is a highly effective technique when used correctly. By focusing on high-potential locations and understanding bullish and bearish formations, traders can capitalize on market reversals and increase their chances of success.
What is the process for trading using the Pinbar strategy?
To trade using the Pinbar strategy, first, identify optimal trading locations like Fibonacci levels, major support and resistance levels, trader action zones, and trendline bounces.
Place pending orders based on whether the Pinbar is bullish or bearish, and set stop losses and take-profit targets accordingly.
Use the trailing stop technique to lock in profits as the market moves in your favor.
What is the win rate for a Pin Bar strategy?
The win rate for a Pin Bar strategy depends on various factors, such as the trader’s skill level, market conditions, and how you stick to the strategy rules. It’s impossible to provide a specific win rate because no two traders trade the same but the Pin Bar strategy is thought to be a high-probability trading technique when used as part of a complete Forex strategy.
How to determine if a Pinbar is showing a bullish or bearish market?
A Pinbar can be either bullish or bearish, depending on where the shadow forms. A bullish Pinbar has a long lower tail, indicating that sellers initially controlled the price before bulls took over and pushed the price up.
A bearish Pinbar has a long upper tail, showing that buyers initially controlled the currency pairs before sellers took over and pushed the price down.
We hope you enjoyed this comprehensive guide on mastering the art of Pin Bar Forex trading. Don’t forget to share and tweet if you found this information valuable and insightful!
Please share and tweet if you’ve enjoyed learning about the pin bar forex trading strategy.
Publish: April 2023
Published: July 2014