Chuka November 6, at 1: Now that we see the larger picture here, price was selling and then formed a SL at. In terms of finding a good entry, one method is to take a pullback into the pin bar itself, but this should always be based upon the order flow around the pin bar and the key levels around it. Daljit Singh Kalkat July 17, at 7:
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The most important thing about the pin bars is that the color of the candle is not considered. Therefore, a bullish pin bar is identified by long lower wicks and a bearish pin bar is identified by long upper wicks, irrespective of how the body of the candlestick closes. Having said that, pin bars can have more validity when the body of the candle also corresponds to the over bias of the pin bar.
For example, bullish pin bar with a bullish close is more valid and likewise, a bearish pin bar with a bearish candlestick is more valid.
While pin bars can form anywhere on the chart, they are considered a strong pattern when pin bars are formed near support and resistance levels. Pin bars can also be commonly formed near a moving average as well as trend lines. Pin bars are valid across all time frames, but of course, a pin bar on a weekly or daily charts take more precedence than pin bars formed on lower time frames.
The chart above shows a pin bar rejection near a previously known support level. Notice how price constantly bounces off the support level subsequently. The identification of the pin bar at the support level shows that it is a strong level of buyers reflected by the long wicks.
In this case, the pin bar is even more valid as the bullish pin bar also has a bullish close twice. If you were to trade based off support and resistance, the appearance of the pin bar is reason enough to take long positions when price revisits the previously rejected price near the support zone.
In the next chart above, we get to see an example of a bearish pin bar. Again, it is more valid because the body of the pin bar is also in the same bearish bias as well. A second test of the resistance level after the first pin bar was formed held and a third attempt was made which formed in a weaker form of the pin bar and prices subsequently dropped lower.
In Figure 5, we have an example of trading trend lines with pin bar confirmation. Here, we first plotted a down sloping falling resistance line connecting the first two lows. As price continues to fall further with the trend line acting as resistance, towards the end, we notice a strong bullish pin bar.
This tells us that while prices were pushed lower, the buyers out numbered the sellers, leaving a long lower wick. Eventually, a few candles later, price broke out of the falling trend line to rally.
As can be seen with the above examples, pin bars can be very useful in expressing the market sentiment. Although they are powerful candlestick patterns, they are not ideal for trading in isolation.
There are many instances where despite the appearance of a pin bar, prices continue to break the previous levels that were rejected. In figure 6, we can see an illustration of how a pin bar formation failed at support level. In the example below, we can see a bullish pin bar signal that formed in the context of an up-trending market. Any time you see a point in the market where price initiated a significant move either up or down, that is a key level to watch for pin bar reversals.
Pin bars can also be traded in combination with other price action patterns. In the chart below, we can see an inside pin bar combo pattern. This is a pattern in which the inside bar is also a pin bar pattern. These inside pin bar signals work best in trending markets like we see below…. For more information on trading pin bars and other price action patterns, click here.
The Pin Bar Pattern Reversal or Continuation A pin bar pattern consists of one price bar, typically a candlestick price bar, which represents a sharp reversal and rejection of price. How to Trade with Pin Bars When trading pin bars, there are a few different entry options for traders.
Pin bar Combo Patterns Pin bars can also be traded in combination with other price action patterns. Counter-trend pin bars are a bit trickier and take more time and experience to become proficient at. Pin bars basically show a reversal in the market, so they are a very good tool for predicting the near-term, and sometimes long-term, direction of price. They often mark major tops or bottoms turning points in a market.
Not every pin bar is going to be one worth trading. The best ones occur in strong trends after a retrace to support or resistance within the trend, or from a key chart level of support or resistance.