Pin Bar Trading Strategy: How to Trade the Candlestick Patterns

Of course if this were a bullish pin bar we would drag the Fibonacci Retracement from the bottom of the tail to the top of the nose. To get our pin bar entry level using the 50% rule, we simply drag the Fibonacci Retracement tool from the top of the pin bar tail to the bottom of the pin bar nose. The break of pin bar nose entry is the more common and conservative way to enter a pin bar trade.

Higher timeframes like daily or weekly charts tend to produce more dependable signals because they encapsulate more data and reflect broader market sentiment. If you’d like to try and identify the pattern for yourself, you can consider heading over to FXOpen’s TickTrader platform to explore real-time charts and trade in over 700 instruments. For example, in the case of the pin bar shown above, you could add a moving average on the chart. In this case, the sell-stop will be triggered if the pin bar pattern is confirmed. Therefore, the easiest approach is to open a trade in the opposite direction and then set a stop-loss at the upper side of the pin bar.

The harami candlestick pattern next to a pin bar increases the chances of a meaningful turnaround as both show reversal signals in tandem at key zones. For example, if there is a false break of support at the bottom of a triangle, the reversal patterns could signal upward price movement and potential trend reversal. However, pin bars require confirmation from the subsequent price action before acting as actionable trading signals. A pin bar is a candlestick pattern with a long tail or wick relative to its body size.

Common mistakes in identifying a bullish and bearish pin bar pattern

We have been trading supply and demand strategies for over ten years, and they have stood the test of time remarkably well. Pinbars are versatile and can be used in various trading strategies. In this scenario, you might consider a short position, with a stop loss placed above the high of the pinbar. Let’s say you’re observing a stock that has been trending upward. Pinbars are more effective on higher timeframes, such as the daily or weekly charts, but they can also be used on lower timeframes. To fully understand the power of the pinbar, it’s essential to dissect its structure.

In this case, in case of a bearish pin bar, they usually set a buy-stop above the upper shadow. In this case, however, the pattern forms in a bearish trend. This is a situation where the initial pin bar pattern is followed by another pin bar. As you do this, there is a possibility that you will also spot other chart patterns in the chart.

How Do You Know If Inverted Hammer Is Valid?

• These counter trend moves push prices into what we call ‘hot spots’ where the price is right for positioning into a trend.
• When we see 5 waves in the downtrend direction on the 15-min chart which constitute wave 1 on the hourly frame (wave degree), here we have to wait for the correction of wave 2.
• But, high time frames (4 hours, daily, weekly) give better pin bar signals with little fake breakouts.
• For a bullish pin bar setup we would place the stop loss just below the pin bar tail.
• A bullish pinbar has a long lower wick and forms in a downtrend, signaling that the sellers tried to push the price lower but failed, leading to a potential upward reversal.
• So hammers are a type of bottoming pin bar showing bullish rejection of lows after a downtrend.

Please do not trade with borrowed money or money you cannot afford to lose. Forex trading involves substantial risk of loss and is not suitable for all investors. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. However, when they do occur at a key level with a favorable risk to reward ratio, they are certainly worth considering. That represents a 4R trade, or 8% profit if risking 2%.

This is followed by a third bullish candlestick that closes even higher, confirming the reversal. The pattern begins with a small bearish candlestick, indicating initial selling pressure. As we update our guide for 2025, this pattern remains an essential tool for traders looking to identify shifts in market momentum. This formation indicates that buyers are entering the market, as they were able to push the price back up from the low reached by the first candlestick. In a downtrend, the pattern is called tweezer bottom, and requires two consecutive candlestick bodies of either color to reach the same low point.

Pin bars act as early warning signs of rejection which open up possible reversals or trend resumptions. It gets its name from the tail looking like a sharp pin or needle sticking out of the candle body. However, analysts had cautioned investors and traders and warned them to remain vigilant regarding price moves for the next few days in order to get a proper confirmation. It had a long lower wick and a small body, indicating a solid buying trend. It has formed at the end of a downtrend and has a long shadow below the body, indicating a price-up move.

At the same time, the stop-loss will help to protect you if the pattern is not triggered. In this case, a trader would have set a sell-stop at $57.69 and a stop-loss at $64.90. A good example of a continuation pattern is the three white soldiers pattern. This is where you is etoro safe just look at the chart and identify it easily. This usually implies that the open price was the highest point while the closing price was the lowest point.

It all depends on the market context and direction of the market when the pattern is formed. A doji, on the other hand, has a very small or non-existent body, with upper and lower wicks of varying lengths. Moreover, as seen bitbuy review in the example above, the price dropped to the 50% Fib level and then climbed up again to the 61.8% Fib level. Some professional traders even hold the trade until they see any other valid reason to exit.

THE BEST TIME TO TRADE PIN BAR

Let us look at what makes the Hammer pattern slightly different from the regular pin bar, although Hammer is a type of pin bar. The wick appears top and bottom of the candlestick, with one of the wicks looking longer than the other. This skill can be very useful for traders, especially during a bearish run, when there appears to be little liquidity to trade and a good technical background is required to profit consistently. Profitable traders believe that having a trading edge, the right psychology, and a strategy distinguishes you from new traders in the cryptocurrency space. But, high time frames (4 hours, daily, weekly) give better pin bar signals with little fake breakouts. The long wick means the price tried to move up to a particular level but could not.

How Do You Trade the Pin Bar Candlestick Chart Pattern?

The pin bar, gravestone doji, and dragonfly doji are all candlestick patterns used to indicate potential reversals, but they differ in structure and context. A pin bar at a psychological level can indicate a substantial price rejection, providing a potentially valuable signal for a trade setup. According to the theory, traders should apply pin bar strategies in markets that exhibit clear trends or strong momentum, where price rejections are more meaningful. In price action analysis, chart and candlestick patterns usually send two main pictures about the market. A bullish pinbar has a long lower wick and forms in a downtrend, signaling that the sellers tried to push the price lower but failed, leading to a potential upward reversal. When it comes to price action trading, understanding candlestick patterns is one of the most important building blocks of your chart reading.

• A body, on the other hand, refers to the block between the upper and lower sides of the shadows.
• He advocates for the careful analysis of patterns like doji, which signify market equilibrium, and stresses the importance of recognizing early reversal signals to avoid poor trades.
• Identifying the pin bar candlestick pattern strategy in a TradingView chart will make it more interesting.
• This pattern is used by traders to identify possible trend reversals or continuations after a pullback.
• Pin bars can be less reliable in choppy or sideways markets where price action lacks clear direction.
• Determine the trend bias using key daily moving averages like the 50 and 200.
• Pin bars can be thought of as a price rejection zone, where major market participants have rejected price from staying at a particular price level.

Expert Candlestick Advice: Opinions from Pattern Trading Legends Steven Nison and John J. Murphy

The price continues the decrease with an even sharper pace. However, this resistance stays untouched and the trade should be held further. The image above displays the chart of the USD/JPY Forex pair. In this manner, we could decide that this is the right moment to exit the trade. Notice that on the way up, the EUR/USD creates a clear support level (blue line).

Choosing the right trading journal is essential for traders wanting to analyze performance, refine strategies, and improve consistency. Both strategies can be enhanced by combining pinbars with other technical indicators, such as moving averages, RSI, or Fibonacci levels, to increase the probability of a successful trade. A bearish pinbar forms near a significant resistance level or a triple top like in the screenshot below. This pinbar signals that buyers attempted to push the price higher, but were met with strong selling pressure, causing the price to drop hitbtc exchange review back down.

Continuation Pin Bar

By now you may have noticed that these Forex pin bar formations look like the hammer candlestick pattern and shooting star candlestick pattern. At the end of the tendency the price action creates a bullish pin bar. However, pin bars can also be valid during a trend, as prices are taking a pause or taking a breather prior to the resumption of that trend. The bearish pin bar is usually a good sign of an upcoming price reversal in the bearish direction. In this manner, before being completed, the pin bar candle has seen a large body in the direction of the trend. Above you see the structure of the pin bar candlestick pattern and its four variations.

These bearish pin bars typically appear at levels of support. The bottom of a sustained bearish trend is typically where the bullish pin bar forms. In either a bullish or bearish market, a pin bar might form.