Pin Bar Trading Strategy - Learn How That Works

Posted by Connor Wilson Apr 28, 2021

The currency strength meter can tip you off to several trading situations you should be aware of, such as the strength and weakness of a currency in relation to other currencies.

Pin Bar is a Forex technical strategy based on price action trading principles. It looks for candlesticks that show signs of retracements/reversals with high accuracy. Today, this article will tell you everything there is to apply this strategy and gather profits from the currency market.

Pin Bar Trading Strategy

Overview of the Pin Bar Trading

If you have learned about Japanese candlesticks, surely you have heard of the Pin Bar candle. This is a candle which has a small body and a long wick, describing a new, strong momentum just coming into the fray and overwhelming the last movement. If the wick lies below the body, it means bulls just entered the game, indicating a rally/bullish reversal. Conversely, with the wick above the body, the candle signals a retracement/bearish reversal. The strength of new momentum depends on the length of the wick: the longer the wick is, the more vigorous the driver is.

Spotting and using Pin Bar candles only to trade doesn’t guarantee a long-term winning since the market is getting more and more complex, leading to a variety of traps. Therefore, combining with support and resistance levels when pin bar trading this type of candle is a must to raise the likelihood of success. A Pin Bar candle is only considered high-quality when it communicates with an obstacle.

How to trade Forex with the Pin Bar Trading Strategy

Since the strategy is based on price action, and price action itself is a comprehensive trading system, you accordingly don’t need to combine any indicators with this strategy. All you need is just a candlestick chart.

To define bullish trading opportunities, do the following steps:
  1. Determine support barriers. The more stubborn the support thresholds are, the more reliable the signals are.
  2. Look for a Pin Bar candle communicating with a barrier.
  3. Open a bullish position when the spotted candle closes.
On the contrary, the steps to identify bearish occasions are as follows:
  1. Determine resistance obstacles. The more steadfast the resistance levels are, the more accurate the signals are.
  2. Look for a Pin Bar candle communicating with an obstacle.
  3. Position a bearish order when the spotted candle closes.
Below are the important terms when using this strategy:
  • Only one position should be entered at a time.
  • The Pin Bar candle must be fully close before any trading decisions are made.
  • The stop loss should be placed above the barrier. The take profit should be two times larger than the distance from the entry to the stop loss.

Pros and Cons of the Pin Bar Trading Strategy

Besides the simplicity, flexibility and high accuracy, this Pin Bar strategy is also appreciated by traders for its diversity. You can use it on any charts and with any financial instruments, including currency pairs, indices, commodities, and digital assets. In addition, no custom indicator is required when Pin bar trading. The only disadvantage of this strategy is that it requires a high level of patience. You must wait for a candle to develop and totally close before trading the opportunity.

Conclusion

Price action is always considered the most powerful trading method because of its capability to present hidden market developments, and the Pin Bar strategy is a part of this method. Once mastering this technical strategy, you can not only follow right direction but also catch the most accurate trading signals. However, a basic knowledge of technical analysis is a must before starting to trade Pin Bar candles. Besides, risk controlling and psychology managing methods must also be used alongside as there is nothing called “perfect system” in the trading world.

author

Connor Wilson

A former employee in the US Ministry of the Treasury. One of the most innovative traders ever. His strategic approach in financial market activities is precise and relevant. Trading strategies and investment portfolio development are his signature skills.

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