List

Also known as Pinnochio bars, a pin bar is one of the most reliable candle formations that you can see on the forex chart. In fact, a plethora of traders consider it to be one of the most powerful candlestick patterns for trading.

Pin bars are found on all instruments of trading and in all time frames. They can either be found at the top or bottom of a trend run that is signaling reversal or at the context of a trend which in this case signals continuation. Therefore, the key to profiting with pin bars is to identify trend reversal or continuation in advance.

What do pin bars look like?

There are high chances that you’ve already seen a pin bar on your Rakuten online trading chart, and if not, it might be that you weren’t aware that you were looking at one per se. A pin bar is a candlestick with a unique structure. It features a long candlewick, small body, and a small candlewick either at the top or bottom provided it is opposite the long candlewick. One important rule you need to know to identify a pin bar is that the long wick should always comprise of at least two-thirds of the entire candle. To make it visually easier to spot a pin bar on a chart, you can program a Pin Bar indicator on your preferred trading platform.

Even though a pin bar candle can be frequently seen on Forex chart, the best tradable ones are usually found at the end of an impulsive wave, extending outside of the preceding price action. When seasoned traders notice a pin bar sticking out below or above the recent price action after a prolonged move, they might prepare to trade regardless of the trend in attempts of catching the reversal price momentum.

What do pin bars represent?

You can think of pin bars as a price rejection zone where prominent market participants have rejected price from staying at a specific price level. If before being completed a pin bar candle sees a large body in the direction of the trend, it creates an impression that the trend might continue with strength. However, if there is contrary pressure, the candle closes near its open level ultimately appearing as a big candle wick. Typically, the bigger the wick, the bigger the lie which refers to an unsuccessful big candle body. This is where the name Pinocchio comes from. The bigger a pin bar is, the stronger the reversal pressure is expected to be.

The price at which a pin bar occurs is the key to identifying the difference in real time. If you want to know whether a bin bar is a real reversal or fake you need to ‘look left’ at prior price action. For the reversal to be real, a pin bar must occur at a prior significant resistance or support level. If the pin bar is pushing through a prior resistance or support level, then the probability of the pin bar resulting in a reversal is high or at least a significant retracement of the prior price action.

How to profit with pin bars

If you’re new to pin bar trading, it is advisable to start with a paper or demo trading platform until you fully understand how Pinocchio Bars work. Picking up pin bars in real life requires extensive practice upon which you might want to expend real money. The reason my demo trading is advised is that trading with real money stirs up emotions that can cloud your observation and learning of any new strategy.

However, when you use a simulated platform, you have the chance of gaining muscle memory of the trading strategy without necessarily getting distracted by your emotions. Once you’ve gotten a grip on the strategy, you won’t have to worry about those details as you battle with the emotions of trading with real money.

  Posts

1 2 3 11
June 4th, 2024

In CFD trading, developing short-term trading methods is crucial 

If you want to succeed in CFD trading, developing a method that can be profitable over short-term time frames is […]

May 15th, 2024

Questions to ask when buying forex signals software  

Forex signals software can be a great tool to help traders make informed decisions and capitalize on trading opportunities. However, […]

March 28th, 2024

Why price action trading is so popular among traders 

Price action trading is the process of trading by analysing raw price data to identify and trade trends. This type […]

March 27th, 2024

9 simple stock trading strategies to avoid losses 

Each day, traders make their way to the markets in hopes of securing profits. However, many find themselves on the […]

February 26th, 2024

Things you should know before opening a brokerage account

If you are considering opening a stock brokerage account, you should know a few things. Each account is different, so […]

February 1st, 2024

What is the best way to trade ETFs on the stock market?

There is no generalised answer regarding the best way to trade ETFs on the stock market. However, there are a […]

August 9th, 2023

Navigating the world of listed options 

Listed options trading can be a powerful tool for intermediate traders seeking to enhance their portfolio returns and manage risks. […]

August 1st, 2023

Choosing a suitable copy trading account: a comprehensive guide 

Copy trading has become increasingly popular for traders to access financial markets with minimal effort and time. For novice traders, […]

July 7th, 2023

Forex Trading vs. Stock Trading: The Ultimate Profit Battle

Ladies and gentlemen, welcome to the ultimate showdown: forex trading vs. stock trading. In one corner, we have the dynamic […]

June 21st, 2023

How to Choose the Best Forex Signals: A No-Nonsense Guide

So, you wanna dive into the exciting world of forex trading, huh? Well, let me tell you, it’s a wild […]