The Simple Guide to Trading Pinbar Candles

So you want to do price action hey? Well if so, you will probably already know that the Pinbar candle is one of the best indicators for where price is going to reverse. It shows that the market pushed its way up or down strongly to certain value and then stopped and reversed on that price. It is where that value in a way was rejected as well and adds extra value to a resistance or support area. That is why under certain circumstances Pinbars show reaction in the forex market where price heads the opposite way. You have to trade Pinbars with caution however like any signal if in the wrong spot it can spell disaster, so using confluence for entry is an optimal way that helps decide whether it is a fake signal or the real thing.

Ideas on Confluence Indications Needed

  1. Price needs to print a Pinbar near or on a Resistance or support area. If it breaks this area before printing it is even better and is more likely to be a real signal. This is a must have!
  2. What is the Stochastic saying, is it overbought? If so that can be used as one aspect of confluence.
  3. What does the fibonnaci retracement tool say, is it a likely a turnaround spot. 61.8 being an optimal turnaround however anything over 50 is good as well. Put the Fibonacci retracement tool located in metatrader on the daily chart or 4 hour chart and see where it lines up.
  4. Is price overextended in general? Has it moved up strongly to one specific point with too much strength, this gives the idea a correction is in order. This happens a lot when price overextends and is a valid signal when it forms a good signal at a resistance or support line.
  5. Does the pinbar candle signal have room to the left. All reversal signals have one thing in common when printing, there is always lots of room to the left.

If the trade has all of these properties or at least including the much needed resistance or support area break then you will have a good trade.

pinbar trading view

Above is an example of this being a good signal with many indications saying it is a good trade. Click on image to get a detailed view of what i mean by confluence in action on this chart. By the way this is a recent Euro Usd 4 hour chart. Looking for these signals works best on higher time frames. Patterns can be seen more easily.

In a way confluence is like being a detective, the more reasons there are the more likely it is going to be a good trade and thus you will lose less money. While it does not guarantee a loss every now and then if we let our winning trades run and cut our losing trades short in the end our gain will be higher by getting into these types of trades.

Where to Enter on a Pinbar and Where to Put the Stop Loss?

When trading the Pinbar candle it is always good to know where to put the Stop Loss as well so I will add my recommendations here as well. Firstly I recommend placing the entry order below the pinbar, that is my first recommendation. If the trade then goes in your favor straight away then it is more likely that it is not a fake signal. So when it comes to the stop loss all we want to do is place it in a spot where it confirms we are wrong on that trade. It is that simple. To me that is right above the pinbar formation by around 20 to 30 pips on a sell trade and right below the start of the pinbar on a buy trade by around the same number as well. Below is a perfect example. If the market moves past this point we were definitely wrong on the trade and so we want to be out.

stoploss example sell

Above – Sell Example

stoploss example buy

Above – Buy Example

Above images illustrate where i believe to enter a pinbar candle trade and where to place the stop loss as well.

About Timon Weller

Timon Weller is the professional Trader behind the blog Forex Reviews as well as a Teacher of Price Action Trading and creator of the popular Training Series teaching people how to trade Price Action effectively called The Engulfing Trader. For other Forex Training available here at Forex Reviews click here.

For more on Timon Weller Click Here. To Learn more about How to Trade the Market and get updates Click Here.

Speak Your Mind