Trading Strategy With Pin Bars

Peeling Trading Strategy With Pin Bars - The formation of a pin bar is usually a price action reversal pattern that shows rejection at a certain price level. A trader who is familiar with this formation will easily make a profit, by opening a position on the bar after the formation of a pin bar.

The following is an explanation of the pin bar formation and how to use it in trading, or what can be called a pin bar trading strategy.

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Definition of Pinbars

Pin bar is an abbreviation of the name of an elongated candlestick bar, namely the pinocchio bar. The candlestick has a tail (tail) or wick (wick) that is longer than the body. Pin bars are often found on daily trading charts and can appear on all time frames.

Characteristics of Pin Bars

A pin bar has a tail that is longer than its body. The tail is also called the axis or shadow (shadow). The length of the tail indicates the strength of the rejection or the occurrence of a false break at a certain price level. The longer the tail of a pin bar, the more valid the pin bar will be. This indicates a growing rejection of a certain price level.

The narrower or smaller the body of a pin bar, the more valid the pin bar will be.

In general, it can be concluded that a pin bar is considered valid if the tail length is approximately two-thirds of the total length of the pin bar.

The other side of the tail is called the nose. The shorter the nose, the more valid the pin bar will be.

Bullish And Bearish Reversal Pin Bar Formation

Bullish reversal pin bars are usually formed in a downtrend and indicate a possible reversal towards an uptrend after rejection at a certain level, as indicated by the tail of the pin bar.

Meanwhile, a bearish reversal pin bar is formed during an uptrend and indicates a possible reversal to a downtrend after rejection occurs at a certain price level.

The tail on the bullish reversal pin bar formation is at the bottom of the body because it shows a refusal to break a lower price level. Meanwhile, the tail of the bearish reversal pin bar formation is at the top of the body because it shows a refusal to break a higher price level.

The characteristic of a pin bar formation is a bar that sticks out between the bars before and after it. In addition, confirmation of the validity of the pin bar can be seen on the bar after the pin bar is formed.

Pin Bar Reversal Confirmation

In order for a bullish pin bar reversal to be confirmed, the length of the candlestick bar after the pin bar (body and tail) must all be higher than the lowest level of the pin bar, and the closing price must be higher than the closing price of the pin bar.

Meanwhile, for a confirmed bearish reversal pin bar, the length of the candlestick bar afterwards must be lower than the highest level of the bearish pin bar, and the closing price must be lower than the closing price of the pin bar.

Trading With the Pin Bar Formation

Often times, the pin bar formation shows a trend reversal pattern (pin bar reversal), although there are also pin bars that indicate trend continuation. There are at least 3 possible ways to enter the bar after the pin bar, namely:

Market Entry

Entry at the market price that is considered the best at that time. Buy entry if a bullish reversal pin bar is formed, and sell entry if what happens is a bearish reversal pin bar.

Stop Entry

This is a pending order in the form of a 'buy stop' for a bullish pin bar reversal and a 'sell stop' for a bearish pin bar reversal. The pending value of the buy stop order must be higher than the current market price, and the value for the sell stop order must be lower than the current market price.

The Stop Loss level can be set a few pips below the pin bar's lowest level (for a buy stop), or a few pips above the pin bar's highest level (for a sell stop).

Limit Entries

This is a pending order in the form of a 'buy limit' for a bullish pin bar reversal and a 'sell limit' for a bearish pin bar reversal. The pending value for buy limit orders must be lower than the current market price, and the value for sell limit orders must be higher than the current market price.

The stop loss level can be set a few pips below the pin bar's lowest level (for a buy limit), or a few pips above the pin bar's highest level (for a sell limit). This entry limit is based on the assumption that usually price movements will retrace or experience a correction when they reach 50% of the length of the tail, or 50% of the Fibonacci Retracement level.

So that the probability of entry that we do is high, it is advisable to enter the bar after the pin bar only if it is accompanied by strong enough supporting factors, including support or resistance levels, Fibonacci Retracement or Expansion levels especially 38.2%, 50% or 61.8%, and the Moving Average indicator curve as a dynamic support or resistance level.