Pin Bars

Filed under: Learn Forex Trading |

Following on from our explanation of the engulfing pattern and the inside bar pattern, today I would like to look at another of my favourite forex signals – the “pin bar”.

Figure 1.

To begin with, let’s look at the shape of a pin bar when we are using the candlestick charts. As you can see from figure 1, a pin bar has a long tail and a short body (the longer the tail and the shorter the body – the better). This shows us that price has moved in one direction, and then suddenly reversed and come all the way back in the same session (whether this be a 1 hour chart, a 4 hour chart, a daily chart, or indeed any other time frame).

Figure 2.

The term pin bar is short for Pinocchio bar. Apart from a pin bar looking like Pinocchio (see Figure 2.) with his short body and long nose, it also has similar characteristics. When price moves in one direction and then suddenly reverses, it is like a lie trying to suck you in before reversing on you. It is often an attempt by big professional players to fake the little guys out or hit stop losses at logical areas. And it often works.

Figure 3.

Let’s look at a chart example now. In Figure 3, price has been moving up for a while until there was a massive bearish pin bar, signalling that a reverse might be on the cards. Indeed, price did reverse and come right back down. Pin bars can be useful at key areas of support and resistance for signalling a reversal. I personally like to wait for confirmation on the next candle and wait for a bearish engulfing pattern to follow it. But many people simply trade pin bars, and some people even wait for a 50% retracement of a pin bar before entering, to lower the risk and higher the reward.  Anyway, I hope this has given a little insight into the pin bar setup, and I’ll be back again soon with more forex articles.

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