The Pin Bar Entry Variation

Filed under: Learn Forex Trading |

Sometimes, the risk-reward scenario of a trade means that it does not warrant taking the risk. But there is something you can do about that. I call it the ‘Pin Bar Entry Variation’. One of my most common ways of entering the market after a pin bar at a significant area of support/resistance is to put an order in at a 50% retracement of that pin bar. This allows for a much better risk-reward scenario. However, sometimes, if there is not much room for the trade to move in to (for example, there might be another area of support/resistance close by), then this also might not be satisfactory. But there is one more thing you can do, particularly with long pin bars.

Figure 1.

Figure 1.

 

Figure 1 shows a long pin bar at an area of support/resistance on the USD/CHF pair (the pair for the United States dollar and the Swiss franc). If we entered this pin bar at a 50% retracement, then a 1:2 risk-reward ratio would take us beyond the most recent low, which acts as an area of resistance. This, therefore, would mean that the trade is not worth our trouble. However, as this pin bar is so long, we could in fact enter at a 66% retracement of the pin bar (or two thirds), with a stop loss placed just a few pips above the high of the pin bar, and with a target of at least two times our risk. Our first target would thus be at the low of the pin bar, which is also a minor area of resistance. This is a logical entry and exit, and with such a large pin bar, one that makes a lot of sense. I in fact put such an order in, and it just missed out on being filled over-night. So there it is: the pin bar entry variation.

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