Forex Pin Bar System

The Pin Bar forex trading method The formation of a pin bar is in fact a trend reversal which consists of 3 bars. The term Pin Bar is an abbreviation of the term Pinocchio Barquot. Lets take a look at how a pin bar is formed and how we can make money from it in the forex market. What is a pin bar To be precise, a pin bar is the middle bar in a three-bar formation which can be found in a bar chart or a candlestick charts. Typically, traders tend to prefer the candlestick chart version, which is considered to be visually superior for observing price action, however, we will initially discuss the formation of pin bars on a standard bar chart. Characteristics of a pin bar formation The opening and closing of a pin bar are very close to each other and near one end of the bar. The wick of the pin bar sticks out far beyond both bars 1 and 3. The longer the wick is, the better the quality of the formation. Examples of pin bar formations Here is a daily chart of USDJPY currency pair, we see many pin bar formations that work very well. EURUSD Daily chart Below is a daily chart of the USDCAD currency pair. After a 3-week bullish streak, we see a perfect pin bar formation which leads to a significant trend reversal. Here is an example of a trending bull market where several profitable pin bar configurations appear. The following EURUSD daily chart shows that pin bars that are taken along with the dominant trend can be very accurate and rewarding. How to trade a pin bar formation To trade a pin bar correctly, you must first make sure that it is well defined (see the above description). Then, try to only trade pin bars that are in agreement with another signal. In general, pin bars that are traded in agreement with a dominant trend are the best. Nevertheless, there are many profitable pin bars that occur within markets that are in a tight range or at major trend reversal levels. Also, try to combine the pin bar formation with support and resistance levels, trend lines, Fibonacci retracement levels or moving averages. A pin bar formation is a trend reversal setup, so for a bearish bin bar formation such as the one featured in the small picture above, we will sell once the pin bars low has been broken through and we will put a stop loss 1 pip above the pin bars wick. And for a bullish pin bar formation, well buy a break above the pin bar with a stop loss 1 pip below the pin bars low. Pin bar formations with candlesticks The formation of pin bars with candlestick charts is pretty much the same except for the terms that are used, which are slightly different. A bearish trend reversal represented by the formation of a pin bar can be referred to as an inverted hammer, a doji, a tombstone, or a shooting star. A bullish trend reversal with a pin bar formation can be called a hammer, a doji or a doji dragon. Pin bar formations can be a very profitable tool in your arsenal of forex trading setups. The best pin bars setups are those that are in confluence with other signals such as support and resistance levels, the confirmation of a dominant trend, or other confirming signals. Look for pin bar formations that match all of the characteristics listed on this page, leaving aside those you dont trust. Pin bars work in all timeframes, but they are especially effective on 4-hour, daily and weekly charts. Pinbar Trading System Pinbar Forex Trading System mdash a popular strategy for entering and exiting positions that is based on the particular candlestick pattern and the following price action. The Pinbar (also known as quotPin-barquot or quotPin barquot ) pattern was first introduced by Martin Pring in his Pring on Price Patterns. Conservative strategy offers low-risk high-yield opportunities. No-loss rate is pretty high if break-even is applied. Rare occurrence. Timing is critical. Supportresistance is difficult to formalize. Strategy Set-Up Any currency pair and timeframe should work, but longer-term timeframes (such as H4, D1 and W1) should work better. Pinbar Set-Ups: The pattern consists of three bars: the left eye, the nose and the right eye. The left eye should be a bar up for the bearish Pinbar pattern or a bar down for the bullish pattern. The nose bar should open and close inside the left eye, but its high (or low, for the bullish set-up) should protrude much farther than the left eye39s high (or low). Both the nose bar39s open and close should be located in the bottom (top, for the bullish set-up) 14 of the bar. The right eye is where the trading happens. An additional condition for the good pattern set-up is the strong supportresistance level formed either behind the eyes or near the point of the nose. The stronger are the supportresistance levels you incorporate into this pattern, the more accurate it will be. You can use the MetaTrader Pinbar Detector indicator to automate the Pinbar pattern detection. Entry Conditions Aggressive entry option is to enter a position when in the right eye price retreats behind the left eye39s close level. Conservative entry point is below (above for bullish set-up) the nose bar. Exit Conditions Conservative stop-loss can be set behind the nearest supportresistance level behind the eyes. A less conservative approach would be to set stop-loss to immediately behind the nose bar point (in this case, your rewardrisk ratio may suffer). Conservative take-profit can be set immediately after the left eye low (high for the bullish set-up). Aggressive take-profit level may be placed farther mdash to the next strong support (resistance for bullish positions) level. Bearish Pinbar Set-Up: This is an example of the aggressive set-up. The entry point (blue line) is positioned at the left eye close (price retreated for that entry). Stop-loss (red line) is placed at behind the point of the nose bar (in this situation, even conservative stop-loss wouldn39t be hit, as the price pull-back during the right eye happened before the entry). Take-profit (green line) is set at the nearby support level and is easily filled. Bullish Pinbar Set-Up: This is an example of the conservative set-up. The entry point (blue line) is placed just behind the nose bar. Stop-loss (red line) is below the left eye. Take-profit (green line) is just above the left eye. Use this strategy at your own risk. EarnForex can39t be responsible for any losses associated with using any strategy presented on the site. It39s not recommended to use this strategy on the real account without testing it on demo first. Discussion: Do you have any suggestions or questions regarding this strategy You can always discuss Pinbar Trading System with the fellow Forex traders on the Trading Systems and Strategies forum. The Pin Bar Reversal Trading Strategy This wouldn8217t be a Forex website if it didn8217t have a good article about the classic pin bar pattern. Candlestick reversal signals are some of the most powerful and abundant signals used by price action traders the most common of them being 8216The Pin Bar8217. Pin bar trading is generally the backbone of most price action trading systems used in todays Forex markets. I work with a different flavor of pin bar, which I call a Rejection candle 8211 which provides more trading opportunities, and a more up to date, modernized view of the reversal pattern. First, let me talk about the classic pin bar, then move on to explain how the Rejection Candle is different, and better. The Anatomy of a Pin Bar Candlestick The Pin Bar candlestick is made up of from a specific layout of the following 3 important focal points8230 The open and closing prices are pretty self explanatory If you don8217t know how read charts yet, please just out the following chapter 8211 Understanding Japanese Candlesticks . The most characteristic feature of the pin bar the 8216nose8217. Pin bars have a long nose (aka candle wick) which protrudes out of one side of the candle body. To qualify as a pin bar, the open and close must be situated at one end of the bar8217s range, and the nose of the bar must make up at least 23s of the whole bars range. The general rule of thumb is 8211 the longer the nose of the pin bar, the more powerful the pin bar signal. A Little History About The Pin Bar Martin Pring was the first trader to notice this pattern on the charts, and in fact, pin bar is short for Martins original term for the bar formation 8211 The Pinocchio bar. If you remember the childhood stories 8211 Pinocchio was a wooden doll that was brought to life by his creator, and every time Pinocchio told a lie, his nose would grow larger. The analogy of Pinocchio tied in perfectly with Martins observations, because a pin bar is broken down into 2 moves. The first par of a pin bars formation occurs when price moves from position X to position Y. Position X isn8217t generally anywhere important, but position Y could be a strong technical point on the chart, like a support or resistance level, a weekly turning point or even another focus point. This initial move draws in the 8216trigger happy breakout traders8217, who love to jump in with the price momentum. Sometimes the X - gt Y price move may even give the illusion that a major breakout is occurring. Phase 2 of the pin bar creation happens when this initial X - gt Y movement is not really the markets true intent, the charts were telling a lie. Price then springs back from position Y to somewhere near its original position X. Just like Pinocchio, the bar grows a big nose as the lie is revealed on the charts 8211 trapping those breakout traders into bad positions. Take a look at the bar chart below. You can see the two phases of price movements which are responsible for printing the pin bar on the chart. How Pin Bars are Used in Trading Pin Bars are one of the most powerful tools a trader can have in their price action arsenal. They form very regularly and can be found across all time frames. The pin bars core purpose to help the trader identify potential reversals in the market. When pin bars form, it is a good sign the market is ready to move in the opposite direction. Price action always tells a story. The story of a pin bar is is one where price moved to an area on the chart. The move is rejected by the market, and pushes price back to its original point of origin. Sometimes even beyond if it8217s a good signal. Working with the logic of the rejection principle of pin bars, we can use them to: Capture potential tops and bottoms to price movements Identify breakout traps that can lead to powerful price reversal moves Position into trending environments at excellent prices. Rejection Candles When Pring first named the Pin bar 8211 the majority of traders were using bar charts. These days traders prefer candlestick charts because they are easier to read, and are more aesthetically pleasing. The candlestick equivalent of a pin bar can carry many names 8211 but here at The Forex Guy we call them Rejection Candles. Pin bars and Rejection candles are almost identical in nature. But traders tend to use the term pin bar when referring to candlestick charts, which is technically not correct. It also doesn8217t sit will since I am OCD about getting things right I don8217t like to call a white cat black, and I try not to call a candlestick signal a 8216bar8217. I call the rejection part of the candle the wick or the tail of the candlestick. A Rejection Candle will have a large wick just like it8217s cousin 8211 the Pin Bar8217s. For a candlestick to qualify as a Rejection Candle it must have the following attributes. The open and close price of the candlestick must be situated at one end of the candle (not in the middle) The wick of the candle must protrude out of one end of the candle body. There must not be any large wicks sticking out both ends of the body. The wick must make up at least 23s of the entire candle length. Clause: If the wick is less than 238217s of the candles range, then the closing price must be either be higher than the opening price for a bullish signal . and lower than the opening price for a bearish signal . This is what makes the rejection candle8217s anatomy differ from the pin bar 8211 they can have thick or thin bodies. Depending on which way the wick or nose produces from the Rejection Candle (or Pin bar signal), will determine whether its a bullish or bearish signal. I like to think of the signal as an arrow on the chart. Imagine the body of the candle is the arrow head. The wick or nose is the arrow body and the arrow points towards where price wants to go. Here is an example of how a bullish Rejection candle points towards higher prices. Notice the bearish rejection in the chart below. See how the wick of the candle protrudes upwards creating that imaginary downward pointing arrow, signalling price wants to move that way. Identifying High Probability Trades Using Rejection Candles Rejection candles, or Pin bars, form quite often across all the time frames 8211 but that doesn8217t mean all rejection candles are ideal trading signals. If you traded every single Rejection candle you would most certainly end up losing money 8211 so it is very important to narrow down the signals that have a higher probability of working out in your favor. To quickly improve our chances of success we trade Rejection Candles mostly from the Daily time frame (sometimes the 4 hour). Anything lower than the 4 hour time frame significantly reduces the quality of the signals. By sticking with the higher time frames we can immediately improve our odds of success 8211 and that really goes for most Forex trading strategies . To further improve the effectiveness of rejection candle trading, its best to trade rejection candles that form at important support and resistance levels on the daily chart. Important support and resistance levels dominant on the daily, or weekly time frame are generally the key turning points for price in the market, especially those from the weekly time frame. Combining these important levels with Rejection Candle or Pin bar signals, you exponentially improve your chances for a successful trade. The odds are in your favor simply because market history repeats itself. If you study pin bars and rejection candles in your Forex historical data 8211 you will see they continuously produce the same response from the market. A bullish rejection candle forms off an important support level 8211 signaling to price action traders that higher prices are likely to develop in the near term. A bearish Rejection Candle forms at an important resistance, tipping traders off to bearish movement before it happens. Here is an example of how Rejection Candle signals can be great reversal signals in ranging markets Here is another example of another 8216thick bodied8217 bearish rejection candle range setup that was discussed in the War Room8230 Notice how the rejection candle had a thick bearish body it to, unlike the common pin bar which only had a small range it its body. These thick bodies give the signal a little bit more 8216oomph8217 and tend to work out much better. Check out what happened next8230 As you can see this rejection candle was able to give a price action trader the early warning sign needed to position into a bearish trade BEFORE the actual sell off occurred. This is a good example of how powerful price action trading really is. Trading Rejection Candles Inside Trending Markets Rejection candles also work great in trending conditions as well. I know we said they are 8216reversal8217 signals but if you think about it, reversals occur with in a trend. Rejection candles are very good leading indicators to let price action traders know when a counter trend movement has terminated. These counter trend moves push prices into what we call 8216hot spots8217 where the price is right for positioning into a trend. 8220Buy the dips and sell the rallies8221 8211 Have you heard this saying before Rejection candles that form at the dips and peaks within trends can offer very lucrative trading opportunities8230 Check out the chart below. The USDCAD has printed a bullish rejection candle. Can you guess where this market might be heading. Video: live rejection candle trade I took on the EURNZD daily chart8230 To Summarize Its very easy to see why Rejection Candles and Pin Bars have become one of the most popular tools used by price action traders in todays markets. Rejection Candles are very powerful candlestick signals, and coupled with the right money management plan you can really do well. Rejection Candles produce excellent returns for price action trader, tip us off to moves before they happen and give us the framework to build a logical trade position from. Rejection candles (and even pin bars) are easy to identify 8211 they don8217t take much effort at all to spot a great trading opportunity, especially when used with our Forex trading strategies . If you would like to continue learning everything there is to know about Rejection Candles like rejection candle entry strategies, stop loss placement, money management for rejection candles and even filtering out good vs bar rejection candle trade signals 8211 the Price Action Protocol trading course inside our Forex Price Action War Room is going to be a - perfect - fit for you. Did you enjoy this article It would mean a lot to me if you could share it Please also leave your thoughts in the comment section below I understand the whole idea but what does confuse me is if you look at where it says swing level the second touch red box, that looks like a bearish rejection candle to me but why did it continue up. also the 3rd candlestick from the beginning left also looks like a rejection candle to me. Is there a reason it did not do what it was supposed to, or am i missing something and looking at this the wrong way Thank you It8217s not just about the candlestick signal which many traders put too much emphasis on. It8217s about applying good market analysis in combination with the candlestick signal. So, there are a few other factors we look for when deciding if a reversal candle is high quality or not. Great article, there have been some really good pin bars lately. USDCAD, AUDJPY and CADJPY come to mind. A good study if you want to see some live examples. All on daily or H4 charts. Please Help Us Spread the Good Word The Pin Bar Trading Strategy might be one of the most overlooked strategy because it8217s seems too simple to be effective for many traders. Many traders think that price action is all technical analysis, however, thats only true to some extend because price action is a more psychological analysis because the price action candles is telling us a story, what the market is thinking and what it could be getting ready to do in the near future. The first thing any professional trader should want to do whether its a Pin Bar or any other price pattern is to understand why youre trading this pattern, whats the story behind it Claim Your 60 No Deposit Bonus Here All you need is to have your live account verified Of course, you need to open a live account. 2 Brokers that we like A LOT USD30 from each Forex Broker Below. Both Forex Brokers have excellent rating We use both of these brokers and proudly promote them Pin Bar Trading Strategy is the core of Price Action Trading The Pin Bar Trading Strategy is really the bread and butter setup for any price action trader as its very easy to be spotted on a chart (see chart below) with clear characteristics and it can be fairly profitable if its in the right market context. Going forward youre going to learn more about the psychology behind the Pin Bar, how to identify a Pin Bar and how to properly trade the Pin Bar. The Psychology behind the Pin Bar Candlesticks can form for a lot of different reasons, but in the case of a Pin Bar, which is a reversal pattern, generally there are two big reasons why they form which in an uptrend the cause can be either buyers getting exhausted or institutional selling pressure while in a down trend the cause can be either either sellers getting exhausted or institutional buying stepping in the market. There is a second dynamic to Pin Bars, generally the price reversal is very aggressive and we should see a quick and sharp reversal. Thank you for your readership. We are truly grateful Hope that you like the strategies that we share. If you like the strategies here, you will absolutely love our latest strategy. The MorningPips Trading System The aim of Morningpips is to finish trading by the morning. Simple as that. Check it out Effective Trading with Pin Bars Just because you found a Pin Bar it doesnt mean you should trade it, because it needs to be in the right market context and it needs to be in the right position. The first think you have to do is to look at the trend prior to the Pin Bar as when we make trades we want to make sure were trading with the trend. The second thing we have to look after major support and resistance levels and the third thing we look after the break of that support and resistance level and then the pullback. For the Pin Bar to be valid you definitely want to have the right market structure, because its going to give you the highest chance of success. The characteristics of a Pin Bar: The size of the Pin Bar: you need a big, bold candlestick that sticks out on a chart The size of the PB needs to be at least equal or larger than the previous bars The wick need to protrude beyond the previous candlesticks and beyond any major support and resistance The body size it cant be any more than a third of the total candlestick size The higher the quality of a PB the more assurance of success you can have and that will help you determine how youre going to plan your trades. The entry and exit rules are quite simple you can either enter at the break of the Pin Bar, once the highlow are broken or you can either use the left eye, which is represented by the candle prior to the PB. Stop Loss is usually placed few pips abovebelow the wick. To be a successful trader you dont need to use a lot of indicators or a special system, all you need to do is look at what the price is doing as price is telling you everything you need to know and you can use that in your favor to make successful trades. Pin Bar Mt4 Indicator Download If you like this strategy, then we have just the treat for you. We have a Pin Bar Mt4 Indicator for you to download free. It is designed to help you detect bullish and bear pin bar on your MT4 chart. Click here to download it now . Please Help Us Spread the Good Word