Welcome to the Forex Trading article on pin bar candlestick trading. The pin bar candlestick is a popular reversal candlestick pattern on the market. It helps identify trends, and entry points and optimize profits. In this article, we will explain what is a pin bar candle, the meaning of pin bar candles, and how to use them effectively in trading.
What are the main characteristics of pin bar candles?
To recognize what is a pin bar candle, we need to note the following characteristics:
- Very short candle body: The pin bar candle body is usually very short. It is usually less than or equal to 1/3 of the total length of the candle. This is important because it shows uncertainty in the market and the possibility of a trend reversal.
- Long candle wick: The length of the pin bar candle wick is also very important. If the wicks are short or almost absent, it is not considered a pin bar pattern. The remaining candle must be very long, at least 2/3 of the total length of the candle.
- The color of the pin bar candlestick is not important: The color is not so important. It can be blue or red.
- Location of appearance: This can appear after an increase or decrease in price. If a candle does not meet these conditions. It is not considered a pin bar and investors need not pay attention to it.
Besides pin bar candles, you can also learn more about hanging man candles. So what is a hanging man candle? A bearish candlestick reversal pattern often occurs at the end of an uptrend. It is a signal that selling pressure at that time is likely to push the price down. Or you can learn about pullback, so pull back meaning? A type of non-trend price candlestick. Indicates that price activity is going against the main trend in a certain short-term period.
The more information and types of candles you learn, the more you will improve your knowledge. From there, trade smoothly and be sure to win.
See more: Master the Forex “game” with Price action
The core meanings of pin bar candles
When the pin bar candlestick pattern appears at the bottom of a downtrend, it shows market resistance and the possibility of a new bottom forming. So what does it mean when a pin bar appears at the top of an uptrend? Let’s find out what is a pin bar candle candlestick means.
What is a pin bar candle ? Use to identify trends
Pin bars can help confirm market trends by gauging the strength of trend and counter-trend traders. A pin bar candle with a long shadow on the opposite side of the current trend represents resistance from counter-trend traders but without success. This shows that the current trend is still strong and is likely to continue.
In contrast, a pin bar candlestick has a long shadow following the current trend. It shows resistance on the part of trend-following traders but fails to sustain. This shows that the current trend is likely to reverse.
What is the pin bar candlestick entry time?
The pin bar helps determine the best time to enter a trade. You can use it for trend trading or reversal trading. To trade with the trend, you wait for a pin bar with a long shadow opposite the current trend at an important price range. You can then open a buy order when the price crosses the top of the pin bar. Or you open a sell order when the price crosses the bottom of the pin bar.
For reversal trading, you wait for a pin bar with a long shadow following the current trend at an important price range. You can then open a sell order when the price crosses the bottom of the pin bar. Or you can open a buy order when the price surpasses the top of the pin bar.
Basic and popular pin bar candlestick patterns
Understanding what is a pin bar candle, you can divide it into two types. It is based on the position and direction of the body which is the Bullish pin bar and Bearish pin bar.
- Bullish pin bar: This is a candle with an upward body and a long lower wick that appears after a price decline. It shows that the pressure from the selling side has decreased. The bullish pin bar is a positive signal. It shows that the market is likely to reverse and prices may increase. This creates an opportunity to buy and expect the price to increase.
- Bearish pin bar: This is a type of candle with a downward body and a long upper wick. It appears after a price increase and shows that pressure from the buying side has decreased. The bearish pin bar is a negative signal. It shows that the market is likely to reverse and prices may drop. This creates an opportunity to sell and expect the price to decrease.
See more: Optimize trading with IC Markets Exchange
How to trade with the pin bar candlestick pattern?
So what is the way to trade with what is a pin bar candle? Forex Trading will provide you with 5 popular strategies that traders often apply to optimize profits.
Trade in the direction of a simple pin bar candle
A simple and effective way of trading with pin bar candles is by its direction. The pin bar candlestick is seen at the top of an uptrend. At this point, you can sell at the opening price of the next candle and place a stop loss at the top of the pin bar candle.
Where the pin bar candlestick appears at the bottom of a downtrend. You should buy at the opening price of the next candle. Place your stop loss below the bottom of the pin bar candle. To take profits, you can set a desired risk/reward ratio. Or you wait for another reversal signal to appear.
What is the combination of resistance and support with pin bar candles?
Another method is to combine resistance and support levels. These levels represent important price levels. A time when the market often reacts strongly to exposure. When you spot a pin bar candlestick at a resistance or support level, you can trade in the opposite direction of the current trend.
For example, if you see a pin bar candlestick at a resistance level in an uptrend, you can sell and vice versa. Resistance and support levels can also be used to determine profit-taking points. Or you use it to adjust stop loss in your trading.
Combine the pin bar candlestick pattern with indicators
You can also combine it with technical indicators. Technical indicators are analytical tools that help you identify trends, strengths, saturation, and entry/exit points in the market. Use indicators such as MACD, RSI, Stochastic, Bollinger Bands, and Moving Average. You can filter out high-quality pin bars and avoid inaccurate pin bars.
Combine pin bar candles with the Fibonacci sequence
Another method to trade with pin bar candlesticks is to combine them with Fibonacci tools. Fibonacci is an analysis tool based on the golden ratio in nature. It helps identify price recovery and reversal levels. Using Fibonacci, you can draw dynamic support and resistance levels. You can trade with pin bar candlesticks when the price comes into contact with these levels.
Combine the pin bar candlestick pattern with the price pattern
Price patterns are price patterns that represent market psychology. It can forecast the next trend of price. You can use price patterns such as head and shoulders, triangle, pennant, etc. From there you can trade with pin bar candlesticks when the price completes a price pattern. For example, you can trade when a pin bar candlestick appears and the price breaks the neckline of the head and shoulders pattern. Or use it when the price exits the triangle pattern.
Epilogue
Hopefully, this article from Forex Trading has helped you better understand what is a pin bar candle and how to use it in trading. Try applying pin bar candles to your trading strategy and observe the results. Thank you for looking here and wish you successful transactions!
Frequently asked questions
What is a pin bar candle?
A pin bar candle is described as a candle with a small body and a shadow longer than the body. It can appear at the beginning or end of a price trend. It symbolizes the transition from an uptrend to a downtrend or vice versa.
How are pin bar candles used in trading?
The pin bar candlestick is a special candlestick pattern in technical analysis. It is used to identify price trend reversals. Remember that trading with pin bar candlesticks requires research and practice. It may take time to grasp and understand clearly in your trading strategy.
How to identify a high-quality pin bar candlestick?
To identify a high-quality pin bar candlestick, you can consider the following factors: Small body; Long shadow; Position in trend; Exposure to support/resistance levels; price model; technical indicators; and confirmation from other elements of the chart; Time and time frame.
It is important to consider all of the above factors and evaluate the overall quality of the pin bar candle. It should be noted that there is no perfect pin bar candlestick. Practice and testing will help you get a better grasp of how to identify
