Now that we know how to read a candlestick patterns correctly, we can now apply one of the strongest reversal signals for price action and that’s the Pin Bar. In this article I will discuss how to identify the perfect Pin Bar and where best to find this pattern.
A Pin Bar is a candlestick pattern where the body of the candlestick is very small and has a very long wick. If this rule is to be followed then you will limit yourself to this perfect pattern and missing out on an awful lot of good trades. This pattern comes in many forms and it is up to you what identifies as a tradable Pin Bar and a non-tradable one.
Here are some examples of Pin Bars that I find are acceptable and will not hesitate to initiate a trade from.
What to look for in perfect Pin Bar
- Looking for a small body to the bar, the smaller the better
- Looking for a wick that is three times the length of the body, but the longer the better.
- Pin Bar with a wick that is ten times the length of the body has a much higher probability than one with much less.
- Pin Bar are like real estate its all about location, location, location.
- The wick must stick out from the surrounding price action.
Where do we look for these Pin Bar patterns
As a price action trader I don’t use any indicators allowing my charts to be as clean as possible, however this is not to say that there isn’t valid tools/indicators that can be used to confirm confluence to enter the trade.
Here are a few ideas or ways to be used with pin bars to validate a potential trade.
- Previous major swing highs or swing lows
- Any major levels of Support and Resistance
- Pivot Points
- Trend Lines
- Round Numbers
- Fibonacci levels
Now that we have the basics of what and how a pin bar should work in the up and coming article I will demonstrate with a few charts some of the ways to enter these trades.