Today we will look at what is PIN BAR – how to trade this bar & how this bar reacts on real time charts.
What is a Pin Bar ?
A Pin Bar is a candlestick pattern where the body of the candlestick is very small and has a very long wick/shadow. The open and close of the pin bar should be very close together or equal (same price), the closer the better.There are two types of Pin Bars a Bullish Pin Bar and a Bearish Pin Bar.
A Bullish Bar is represented by a small body at the top and a long wick/shadow below, this indicates that price was sold down by the bears and then immediately bought straight back up by the Bulls.The opposite of this is true for a bearish pattern.
Below are some examples of some bullish PIN BAR which indicates a BUY signal & the opposite is true for a bearish pattern.
Where & HOW to trade PIN bar formation >>
FIND A TREND TO TRADE “PIN”, NOT A FLAT PRICE ACTION MOMENTUM :
Where not to trade PIN : “ In flat market & against a trend “
Where to trade PIN : “In a TRENDY market”
Pin bars should not be traded in the middle of consolidation or a sideways market. Oftentimes in consolidation, pin bars will form, but these signals are not reliable. Here is an example how it looks like :
Here is a chart example I’ve shared below to explain how PIN bars are formed in flat market – price printed a bearish PIN bar in flat market momentum & So this PIN bar is not trade-able.
Look for a PIN formation in a trend only & ignore PIN when formed against an existing trend.
When the trend is bullish look for bullish PIN formation on key support area & when the trend is bearish look for bearish PIN formation on key resistance areas. In chart, we can see two bearish PIN formed when the price is trending up & eventually those PIN sell signal failed. But when the same bearish PIN formed in-line with a downtrend ,it worked out well with a huge sell-off in-line with the trend.
We can trade pin bar setups from major EMAs (exponential moving averages) while price is in a strong trend.The EMA that I use is 20 period EMAs on the daily chart timeframe. Here in chart you can see price printing bullish PIN formations as buy signals & shooting up from there in an uptrend.
Since I trade commodity futures too,I’m sharing another chart in MCX-SILVER – where price is in a strong downtrend & a bearish PIN sell signal formed on 20ema resistance area & then a large sell-off.
Here is another example for “ why to avoid trading PIN signal against a trend “. After a huge sell-off rally, we found a bullish PIN formation which is a BUY signal.But the PIN signal’s failed due to being formed against the downtrend.
Here is another chart example of “trading PIN formation in-line with the trend”.
Here on chart, price formed a bullish PIN formation as a BUY signal around 20ema support in a strongly uptrendy market & finally it ended with a huge move up with trend.
Last example of “Trading PIN with trend” :
While trending strongly up,the index formed a BEARISH PIN as a sell signal.But looking at the UP-trend, we should only look for bullish PIN formations as buy signal on support areas & finally we got a small(not so strong) bullish PIN on 20ema support from where price started moving strongly upward.NOTE: I use 20ema as support areas to hunt buy signals in an uptrend.
The RIGHT & WRONG PIN BARS :
Now, Here comes the most important part of trading PIN bars. Identifying the right PIN bar is very important while we trade a PIN. There are “TRADE-ABLE PIN BARS” as well as “NON TRADE-ABLE PIN BARS”. Though chart screening experience in charting,guidance of a master/trainer plays a vital role while identifying the correct PIN bar , still I’ll try to explain the way you can choose the correct PIN. Bullish Pin bar with extra-long lower shadow as well as bigger in size as compare to surrounding price action candles are usually traceable as correct PIN bars to trade a BUY entry & opposite is true for bearish pin bar to hunt a SELL entry. In my TRAINING COURSE – in PIN BAR TRADING module, I teach how to recognize the correct pin bar using live market examples happening everyday. Learning the market realtime when it’s happening around is a great way to learn & understand market & that’s how i learnt trading hence i do the same with my students.
Here are some examples of correct & incorrect PIN bars :
Checkout all these charts – I’m ignoring the small shaped PIN bars & trying to hunt the bigger/larger with large lower shadow for bullish & large higher shadow for bearish PIN bars for entry.
Finally, “PIN BAR” is a powerful trading method I use everyday in all form of markets (indian stocks,commodity, currency & international markets like global forex & US) too. To trade a PIN correctly, apart from all the topics we discussed here, traders must know about :
1) When to avoid PIN bar trade even being in a trade ( filteration techniques )
2) PIN bar entry methods
3) PIN bar stoploss & exit methods
4) Identifying a valid PIN bar
5) PIN bar trading as continuation signal
6) PIN bar trading as fakey signal
7) Understanding quality of PIN bar signal
8) Trading PIN bar with multi-timeframe analysis
9) Trading PIN bar in intraday / lower timeframe
10) Quality/shape of a PIN bar while traded in lower timeframe/intraday ……… & more