I am sure there are many guides and ways of trading pin bars you have read before however without seeing it in action it can make it very hard for a trader to get it right or do it right. There really is a particular way it should be done for effectiveness and of success in application.
First of all, if you are new to trading then this post is surely for you, pin bars would have to be one of the most successful and easy ways of trading by far. In fact it is such a successful way of trading that i use it daily or weekly on my main forex accounts. That is not to say this is the only way i trade, however it is definitely the main way.
The psychology of a pin bar is simple, it is where the market pushes price on one candle to the certain price but then before close of that candle the opposite traders will turn the market. So basically where the market is forced back hard. These candles represent major change in a pair and also a trend change if you are using the higher time frames such as h4 or higher. Another name one could call them is the money candle because really they do just that, get you in on a major shift on a certain currency pair.
Now, let me make this clear, not all pinbars are joy, some are between price zones and should be ignored. It is the ones at important support and resistance which are the ones to pay attention too the most.
What to Look For in a Pin Bar Candle?
- That it has formed at a major support or resistance. At resistance you want to see a a bearish pin bar and at support you want to see a bullish pin bar.
- You want the pin bar to be as big or bigger than the previous few candles. Bigger pin bars mean more of a power shift and that is good.
- You want to place order a few pips below pin bar as you want the order only to open if price moves beyond that candle. This is conservative but will cut back on false candles by over 70%..
- Place a stop loss just beyond candle pin. All one wants to do is place a stop where they are proven wrong, do not worry, nine trades out ten are successful with proper pin bar candle trading so one or two trades going wrong is part of it.. It happens.
- Higher time frame pin bars are the best, personally i like the 44 but anything over 1 hour is great as long as you are aware of where these candles are of value.
- Ignore the news, if you want to trade pin bars you need to keep out of fundamental babble. All it will do is confuse you, the candle remember says a lot.
- Okay last rule, do not buy at tops of the daily chart or sell at the bottom areas of the daily, these are areas where a major shift will happen, instead look for only buy opportunities when price is near daily bottom support or look for sell opportunities at the daily major resistance. This goes with any form of trading and is a very common mistake of even high quality traders so remember the major zones on the chart.
How Much Money Can a Pin Bar Make?
Well that depends on the area between the zones, however what one can do is lock in profit along the way and go for further zones. With effective pin bar trading there is no reason you cannot lock in more than 100 pips easily on every trade. In time you will get better and better at spotting these zones so remember, be patient and always wait for the candle to close before entering the trade itself.