The 50% Retracement Entry on Pin Bars with the Trend

Filed under: Learn Forex Trading |

Today, I would like to talk you through a very specific trade setup – which is the 50% retracement entry on pin bars with the trend. Although this trade setup has a little more risk attached to it due to the retracement, I like this setup because it provides a very good risk-reward scenario.

Figure 1.

Figure 1.

 

So, let’s get right to it – and take a look at Figure 1. This is the daily chart for the EUR/USD pair in 2001, and it is a trade that I took on Forex Tester. What you can see is that price had been moving down in a bear trend, and then price had broken through a previous support/resistance zone, and then formed a bearish pin bar. Therefore, I put an order in to go short at a 50% retracement of this pin bar, with a stop loss placed just a few pips above the high of the pin bar, and no target set at all – intending once again to manage the trade. As you can see, this order was filled (as it often is with these 50% retracement of pin bars), and once price makes it past the low of the pin bar, we are already in profit equal to that of our risk!

 

Figure 2.

Figure 2.

Price continued to move down, and as this next candle had a bit of a long tail on it, I moved the stop to breakeven at this point. Figure 2 shows what happened next. A bullish pin bar formed, and it was here that I moved the stop once again, locking in some profits, to just above the high of the bullish pin bar. This stop was subsequently hit for a profit of around 1.2 times the risk. However, the really great thing about these setups is that sometimes, you can hit a trend and profits can just run and run, making some very big gains due to the very tight stop losses.

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