Trading Pin Bar Reversal

Trading Pin Bar Reversal

A picture paints a thousands words, and that's how we should view our charts where each candle  describes what's currently happening with price as well as it's history. Candles are always born neutral, after birth they can grow to become either bearish or bullish. Now if there's a candle that can describe exactly who won the battle between bears and bulls it our famous pin bar. In the next few examples I will discuss charts with EMA, Support and resistance, Trend lines & Swing High & Lows. Please feel free to seek examples using other methods and indicators with pin bars.

Horizontal Support & Resistance

In the chart above we can see that there is a strong horizontal  level / zone, where on numerous  occasions price action found either support or resistance. In the later part of the chart a strong breakout of this level to the upside occurred and we can see that horizontal level previously  resistance now has become support. Now that price has broken out we can wait for a pullback back to this horizontal level for a price action signal to enter the market and follow the momentum to the upside.

EMA

This chart we can see that price was ranging for a while bouncing off strong support. A pin bar signal formed where we can see price moved aggressively to the upside. Please note when taking a reversal candle or counter trend trade make sure that the candle closes in the direction of the trade, so for this example the first pin bar would not be traded as it didn't close as a bullish pin bar and it wasn't the best looking pin bar as it looked like more of a indecision candle. The next 2 highlighted pin bars are tradeable where we can see price rejecting EMA off short term support.

Trend Lines

In this chart we can see a strong uptrend is in place where swing lows are being formed as price moves up. On the chart I have highlighted a valid pin bar allowing us to enter the market.


Conclusion

The Pin Bar Candlestick reversal pattern is one that not only happens to occur quite frequently, it is also one of the most powerful reversal patterns available to a forex trader. This pattern can be traded on any time frame and is best traded from major price action levels like previous support and resistance or pivot points and the like. The better the Pin Bar formation the higher the probability and the better the location the higher the probability. Only take the best Pin Bars in the best locations and the rewards will speak for themselves.

The Perfect Candlestick - Pin Bar

Now that we know how to read a candlestick patterns correctly, we can now apply one of the strongest reversal signals for price action and that's the Pin Bar. In this article I will discuss how to identify the perfect Pin Bar and where best to find this pattern.

A Pin Bar is a candlestick pattern where the body of the candlestick is very small and has a very long wick. If this rule is to be followed then you will limit yourself to this perfect pattern and missing out on an awful lot of good trades. This pattern comes in many forms and it is up to you what identifies as a tradable Pin Bar and a non-tradable one.

Here are some examples of Pin Bars that I find are acceptable and will not hesitate to initiate a trade from.

What to look for in perfect Pin Bar

• Looking for a small body to the bar, the smaller the better
• Looking for a wick that is three times the length of the body, but the longer the better.
• Pin Bar with a wick that is ten times the length of the body has a much higher probability than one with much less.
• Pin Bar are like real estate its all about location, location, location.
• The wick must stick out from the surrounding price action.

Where do we look for these Pin Bar patterns 

As a price action trader I don't use any indicators allowing my charts to be as clean as possible, however this is not to say that there isn't valid tools/indicators that can be used to confirm confluence to enter the trade.

Here are a few ideas or ways to be used with pin bars to validate a potential trade.

• Previous major swing highs or swing lows
• Any major levels of Support and Resistance
• EMA
• Pivot Points
• Trend Lines
• Round Numbers
• Fibonacci levels

Now that we have the basics of what and how a pin bar should work in the up and coming article I will demonstrate with a few charts some of the ways to enter these trades.

 

Pin Bar Candle Stick Pattern

The Pin Bar Candlestick Reversal Pattern in my opinion is the single most powerful candlestick reversal pattern there is! When identified correctly and traded the right way it will produce consistent profits time and time again.

What is a Pin Bar?

To understand what a pin bar is I must first discuss candlestick patterns. Candlesticks are formed using open, high, low and close of the chart time frame we are using. If the closing price is above the opening price then we will have a green/white bar. If the close is below the opening price then we will have a red/black bar. The filled section of the candle is know as the body and the thin lines poking above or below the body displays the high/low range also know as the shadows. The top of the upper shadow is the high and the bottom of the lower shadow is the low.

Long bodies indicate strong buying power or selling. The longer the body the more buying or selling pressure was present whereby short bodies imply very little buying or selling activity. The upper and lower shadows on the candle sticks provides us with important data about the trading sessions. A candlestick with long shadows indicates that trading occurred well past the open or close well with small shadows indicates the opposite. 

A Pin bar tells us the story between the bears and the bulls. If we have a candle stick that has a long shadow ans short lower shadow, this indicates that the buyers where in control but throughout the session the sellers can in and drove the price back down to end the session near it open price. Example of this is the red pin bar below.

A candle stick that has a long lower shadow and a short upper shadow this normally means that the sellers where in control for most of that session, however the buyers came and drove the price higher to close near its open. Example of this is the blue pin bar seen above.


Conclusion

A Pin Bar is a candlestick pattern where the body of the candlestick is very small and has a very long wick. There are two types of Pin Bars a Bullish Pin Bar and a Bearish Pin Bar. A Bullish Bar is represented by a small body at the top and a long wick below, this indicates that price was sold down by the bears and then immediately bought straight back up by the Bulls. In a perfect world the close is above the open for a bullish pattern and no wick at the top of the body. The opposite of this is true for a bearish pattern.