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“PIN BAR” trading strategy explained

The Pin Bar Candlestick Pattern is the most powerful candlestick pattern when identified correctly and if traded the right way, it will produce consistent profits no matter what market you trade.

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 :

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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

November 19, 2014

2 responses on ""PIN BAR" trading strategy explained"

  1. thank you very much mr rajeeb.with ample suggestions and examples you clarified it.one query,hammer and pin are two same?

  2. thank you very much Rajeeb , it is very interesting,

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