The pinbar is a candlestick design that has a long tail and can be either up or down. It represents the price rejection at the support or resistance level for forex trading.
The pin bar is the most effective and powerful candlestick pattern in technical analytics. This candlestick pattern gives a reversal signal, but there are other uses for the pin bar in technical analysis. It can also be used to draw SR Flip Levels. This article will cover every aspect of pinbar candlestick. This article is worth reading.
What is a pin-bar candlestick?
Pin bar candles have a small body with a long tail. A long-tail up means that the price has been rejected at a given resistance level. Pin bar long-tail down indicates price rejection at a support level.
A shadow is visible below the bearish candlestick, and above the bullish candlestick.
To determine if a pin bar candle is valid, there are two conditions.
- The body of the pin bar candle must not exceed 20% of the total candle size.
- The candle’s tail or wick must not exceed 80%
What is price rejection?
A fakeout is a hunt for retail traders who reject the price. Institutional traders and big banks use this fakeout to cut retail traders before the emergence of a new trend. Price rejection is a way to find out the key levels of reversal.
Lower timeframe Pin bar
Switch to the shorter timeframe to do a detailed analysis of a pin-bar candlestick. This will give you an engulfing candlestick. Let’s say you have a pin bar on a 30 minute chart. You will see an engulfing candlestick pattern if you switch to 15 minutes.
This is the most important thing to remember: candlesticks opening, closing, high, and low prices.
The image below shows how I combined two candlesticks to create a pinbar. You can also combine three or more candlesticks to create a pin bar in a longer timeframe.
In the forex technical analysis, there are two additional types of pin bar candlesticks.
- Bullish pin bar
- Bearish pin bar
Bullish pin bar
A bullish type of pin-bar candlestick where the long-tail candlewick is below its body is called a bullish pin bar. This pin bar signifies the end of the bearish tendency. A pin bar that is good forms at the end of a bearish trend ( Oversold condition), and indicates a clear price rejection below a particular support level.
The color of the candlestick does not matter in a bullish pinbar. The opening and closing prices of candlesticks can differ from one another. The purpose of the bullish pi bar will not change. The closing price and the location of the pin bar are what matters.
Bullish pin bar: Information Table
| Features | Explanation |
|---|---|
| Number of Candlesticks | 1 |
| Prediction | Bullish trend reversal |
| Prior Trend | Bearish trend |
| Counter Pattern | Bearish pin bar |
Bearish pin bar candlestick
A type of pin bar candlestick where the tail extends above the body is known as a bearish pin bar.
The bearish pinbar indicates that bulls have left the market and that a new bearish trend has begun. The overbought conditions and at a particular resistance level are the best places to form a pin bar.
It is important to only trade pin bars that form at a specific key level. Traders like to buy or sell at key levels such as Round numbers and Fibonacci levels.
Pin bar rules
Three rules have been developed to help you identify a valid pin-bar. These rules must be followed.
- The body of the pin bar candle must not exceed 25% and the tail must not exceed 75% of the total candle size.
- Pin bar candles must form at the top of a trend (overbought or oversold ). It must not form in a market structure that is ranging.
- The range of the previous candle must be used for closing the pin bar.
Pin bars are always valid if they are located at the swing high point or swing low. Below, you can see the pin candle’s location.
Psychology of pin bars in forex
It is crucial to understand the reasons for a trend reversal due to the pinbar pattern to trade a pattern logically. Let’s say that price is in bullish territory (higher highs, higher lows). Now, price has reached a resistance level at which sellers wait to trigger stop-loss orders.
The market began a bearish trend after it took sell orders at the resistance level. However, market makers do not want retail traders to make a profit. They will play a game to raise the price above the resistance zone (fake it out). After defeating retail traders, they will lower the price to the resistance zone. A bearish trend will then begin.
This fake-out refers to the long wick in the pin bar. This is the psychology behind the pin bar pattern. If it closes outside the range of the previous bars, then do not trade this pattern as it will be a continuation signal.
Difference between pin bar candlestricks and doji
The pin bar candlestick always includes the body (around 25%) at either the top or bottom. However, a Doji Candle doesn’t have a body. Doji candlesticks have the same opening price and closing price.
Doji candles may form within a trend or range.
It represents market indecision. The pin bar, on the other hand, indicates a trend reversal. To make a profit, you must trade with institutional traders or banks. If you follow retail traders, you will surely lose.
The image below will help you distinguish between the doji candle pinbar candlestick and the one shown.
Forex pin bar candlestick trading strategy
You can use a pin-bar candlestick in a trade strategy in many ways. Here’s how to do it.
Let me tell you how the pin bar candlestick’s high and low points act as important levels. Big players can move the market and stop-loss hunting leaves behind some footprints.
These footprints indicate that they have left behind key levels that serve as strong resistance and support levels .
This is also logical because rejections at certain levels are usually strong. I use this technique for drawing key levels. See the image below to see how important they are.
Analysis of longer time frames
Trade these levels by using a longer timeframe. A longer timeframe analysis will increase the likelihood of winning a trade.
How to perform a time-based analysis? It’s very easy!
- Draw an S&R flip level in a longer time frame (like 4H) using a pin bar long tail high or low.
- If you are looking for a pin bar or engulfing pattern at the key level, trade in the direction that main trend is heading.
Let me show it to you.
You have been shown the main reason why I wrote this article. How can we use Pinbar patterns to draw key points (reversal peaks) to our benefit? This article is going to help you get to the Next Level of forex trading.
To summarize, you will need to look out for pin bars in history. Then draw a horizontal mark on the tail of that pin bar. This will act as a key point. These levels can also be used to Trade with Trends. For more information about pin bar trading strategies, see this video.
Conclusion
The pin bar pattern represents the footprints made by the market maker. If this pattern is back-tested at least 100 more times, you will be able to find the best patterns. It is extremely important that you look at the opening/closing price of every pattern. Professional traders can analyze all time frames simply by looking at these prices.
What is the difference between a pin bar and a hammer?
There is no difference in hammer and pin-bar candlesticks. The basic psychology behind candlestick patterns is the same. Don’t get lost among the many names of candlesticks.
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