Forex Trading with Pin Bar Pattern
Pin Bar is one of the most popular candlestick pattern traded successfully by forex traders from around the world. The main advantage of the Pin Bar pattern is its success rate as well as its versatility. You can spot profitable Pin Bar patterns at the shortest time-frames as well as in the long-term charts.
I bet that you will not guess correctly how the term “Pin Bar” was founded. The term “Pin Bar” was explored by Martin Pring, a forex trader and respected technical analysts. He derived the name from the tale of Pinocchio. You most probably remember that every time Pinocchio lied, his nose extended. And in the forex trading, “Pinocchio Bars” or just “Pin Bars” work the same. The longer the wick of Pin Bar is, the more market lied about its direction, and the stronger the Pin Bar pattern is. The Pin Bar pattern is always signaling a change in the market direction.
Pin Bar is equal to the Shooting Star candlestick pattern (signaling a change of bullish trend to bearish trend) and the Hammer candlestick pattern (signaling a change of bearish trend to bullish market trend).
Correct Pin Bar candlestick pattern is described as below:
- The open price as well as the close price should be inside of the range of pervious candle.
- The Pin Bar should have a long wick that should create a significant new market maximum or minimum. Bullish Pin Bar should have the lower wick as long as possible, while no or small upper wick. Opposite rules apply in case of bearish Pin Bars.
- The body of the Pin Bar is usually small, and it does not matter that much whether the Pin Bar's body is bullish or bearish. However, a bullish body in case of the bullish Pin Bar adds some little extra points (opposite in case of bearish Pin Bars).
- The Pin Bar should close near the minimum or maximum price level of the previous candle.
In the picture above - you can see a valid bullish Pin Bar pattern. You can also see that the Pin Bar pattern nicely spotted the reversal of the market. And one more very nice bullish Pin Bar can be seen in the chart below.
Bearish Pin Bars look exactly opposite. Note that in the chart below, the bearish Pin Bar has the long upper wick, while there is a very small lower wick. The candle creates a nice high of the market, and the Pin Bar closes inside of the range of previous candle.
Forex traders usually like to use Pin Bars with other tools of technical analysis. The more tools will confirm the pattern, the stronger the Pin Bar is, and the higher probability of success there is. Traders usually use Pin Bars in a conjunction with:
- Significant supports and resistances
- Important market highs and lows
- Psychological levels
- Fibonacci retracement levels
- Moving Average – used as a moving S/R
- Trend Analysis
- Other forex indicators
This example of Pin Bar trading system is pretty easy to use and just needs a few minutes per day to scan the charts if you will trade it at a higher time-frames (like H4 and above). But you can use it at any time-frame as well as market, just choose which one suits you the best.
Once you identify a Pin Bar, simply analyze current market structure – the latest supports and resistances. For identifying the latest supports and resistances, you can use our S/R indicator . If a Pin Bar lays at some important support / resistance zone, and is bouncing from it, there is a valid entry signal. Such a situation you can see below.
As soon as the valid signal appears, you can enter a trade by placing the stop pending order. In case of the bearish Pin Bar, the sell stop order should be placed below the low of the Pin Bar. In case of bullish Pin Bar, the buy stop order should be placed above the high of the Pin Bar.
Stop-Losses should be always placed on the opposite side of your entry point. So if we have the bullish Pin Bar, our Stop-Loss should be placed below the low of the Pin Bar. And if we are going to trade based on the bearish Pin Bar, then our Stop-Loss should be placed above the high of the Pin Bar. Note that we nicely adapt to current market volatility by this simple rule.
For closing your trades in a profit and planning your Profit-Target levels, you can nicely use the nearest S/R zones. You can always close the entire trade at the first nearest S/R zone, or close the trade partially and aim for higher profits by setting Profit-Target levels at other S/R zones. In case of buy trades, the Profit-Target should usually be set below S/R zones, and in case of short trades, your Profit-Target level should be set above S/R zones to increase the probability that your Profit-Targets will get filled.