Pin Bar Forex Strategy

Pin Bar Forex Strategy

Submitted by adil on Fri, 12/13/2013 - 12:11

The pin bar Forex trading strategy when used correctly can help you make a lot of money from the market. It is an outstanding method trading profitably in the market. However, you need to analyze the pin bar correctly before using this particular strategy in order to maximize your profits.

What is a Pin Bar Strategy?

The Pin Bar strategy is just like the boy Pinocchio whose nose got longer every time he told a lie. That is exactly why the Pin Bar is also called the Pinocchio bar because its length represents the elongated nose of the Pinocchio and the Pin Bar strategy indicates that the market is deceitful in terms of prices.

As the market price increases to a certain level in the same direction as that of the trend, it falls all of a sudden down to its initial level. Thus the market lies about where the price was actually heading.

The body of the Pin Bar Reversal is small whereas its wick is long that has the ability to extend from the top or below of the body. With the little practice, you can easily identify them on the charts.

The price of the candle declines to initial level due to the fact that traders reject the direction of the price. This simply indicates that the counter trend players have made an entry in the market and traders belonging to previous trends have lost their esteem.

Characteristics of a Pin Bar:

Following are some of the easy to understand rules that will help you to easily locate pin bars on charts.

• Wick should be at least 3 times longer than the candle's body.
• Ideally, the size of the wick and previous candle should be equal but bigger wick is always better.
• The length of the previous candle must contain the closing price that is there should be no gapping.
• Smaller wicks and smaller bodies are always preferable.
• The body must look like the hammer or a mallet and should be on either end of the wick.

How to Trade in Pin Bar Setup:

First of all, you need to ascertain that the pin bar under consideration fulfills the above mentioned criteria. The trader must wait for the candle in question to close in order to achieve this. Only this way you can evaluate that the candle is the true and perfect pin bar.

Secondly, you need to ensure that the pin bar has formed preferably at a resistance or key support level at the top or bottom of the trend. The pin bar virtually becomes useless if it has formed in a range-bound market unless the range gets higher or lower.

However, if the pin bar is located on the top of the trend that is corresp
 

onding with the resistance of the market, this is an excellent setup for the purpose of the short trade. On the other hand, the pin bar at the bottom of trend at a supporting area is perfect for long trades.

Finally, the pin bar strategy should be practiced on demo accounts before applying it on real money. If you master this price action reversal set up, you will be able to make really profitable and high probability reversal setups when you take setups, context and price action into consideration.