A pin bar is a potent signal in any chart, especially in a trending market. A beginner must learn to trade pin bars on the daily time frame before attempting to trade them on a lower time frame.
A Pin bar is generally any candlestick that has a smaller body and a longer tail which represents a sharp reversal or rejection of the price.
See this post on how to trade pin bars
The long tail is sometimes referred to as ”wick”. The body is an area that represents the open and close of the pin bar.
This area is usually smaller in size. When observing any pin bar, it should look like a hammer with a long tail.
Generally, the longer the tail, the sharper the rejection of price. The implications are that price will continue to move in the opposite direction that the resistance occurred.
Let’s see the example below:
When you look at the above chart, you can see that I placed two white arrows pointing downwards and corresponding to two pin bars with significantly longer tails and smaller bodies.
Note: In this post, I am talking of a bearish pin bar (which has a lower body and a tail on the upper side). On the contrary, a bullish pin bar will have an upper body and a tail below it.
In the context of the market above, we can say that these two pin bars are bearish pin bars implying that this market will continue to fall.
Now, let’s take a look at the image below.
From the above chart, we notice that an inside bar (the small green bar after the two pin bars) formed. This was immediately followed by a candlestick that looks more or less like a pin bar but with a bigger red body.
This is the ideal sell signal that I was looking for in this particular trade. By the way, this trade gave me 100 pips (as you can see in the cTrader chart above).
The Pin bar trading strategy is very simple. When you spot a down trend like this one, you should be looking for good entry points. One of the best entry points are usually preceded with one or two pin bars.
One pin bar is good because it suggests the continuation of the trend. However, if two pin bars form at once (like in the example above), we can be sure that we are acting on a setup that has also given us a strong confirmation. That can be a good pin bar trading strategy to master and use in your routine trading plan.
Pin Bar Trading Strategy: points to take note of
I like to tell my students to stick to pin bar trading on a trend. The reason for this is very simple. Any pin bar that forms in accordance with the trend has a 95% chance of working out.
We must first establish whether or not a trend exists. If it does, we should be looking for bearish pin bars as entry signals in line with the down trend.
The opposite is true for up trends. We should be looking for bullish pin bars instead.
Thinking that we can make money against a trend by entering trades based on pin bars alone is foolish though. To this day, Me and my students trade pin bars that are in line with a trend.
Which time frames are good for trading pin bars?
When you purchase my Forex and Cryptocurrency trading course, you will realize that I mostly emphasize on the daily time frame rather than trading on lower time frames.
The reason you must learn to trade the daily chart is because lower time frames are sometimes full of ”market noise” that can mislead the untrained eye with the numerous false signals.
Therefore, when a pin bar forms on the daily chart, it has a much higher chance of working out by virtue of being on the daily chart where there is less noise and more accuracy.
I have created a price action trading course for beginner and intermediate traders who want to learn pin bar trading strategies on a trending market and also in other market conditions.
It is my hope that having read this pin bar trading strategy on a trend, you will avoid common pitfalls and instead increase your trading accuracy as far as picking a pin bar signal on a trend is concerned.
Author: W. O.
W. Omondi is a swing trader and an investment blogger. He reviews trading products and only recommends trading products that work.