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Trading Method with Pin Bar

Introduction to Pin Bar Method in Forex Trading

A pin bar is a candlestick pattern that often forms in price movements and can provide reversal signals or trend reversals. In this article, we will discuss the characteristics of pin bars, examples of bullish and bearish reversal formations, and effective ways to use them in trading.

Characteristics of Pin Bar Formations:

  1. Open and Close Prices: Located inside or very close to the price range of the first and third bars.
  2. Open and Close Price Distance: The smaller the distance, the better.
  3. Tail (Long Wick): Extends out between the two enclosing bars; the longer, the more accurate.

Examples of Bullish Reversal and Bearish Reversal Pin Bar Formations:
  • Bullish reversal formation: Closing price above the opening price, indicating potential upward reversal.
  • Bearish reversal formation: Closing price below the opening price, indicating potential downward reversal.

Trading with Pin Bar Formations:

  1. Market Entry: Watch for the formation of a pin bar on three consecutive bars. Enter the market when the characteristics of the pin bar are met.
  2. Support from Other Indicators: Increase accuracy by using other indicators such as trend lines, support and resistance levels, moving averages, or Fibonacci retracements.

Timing Market Entry and Stop Loss Levels:

  • Bearish Pin Bar: Enter sell after the price breaks below the lowest level of the pin bar, place stop loss above the highest level of the pin bar's tail.
  • Bullish Pin Bar: Open buy after the highest level of the pin bar is broken, place stop loss below the lowest level of the pin bar's tail.
Pin Bar Formations in Candlestick Charts:
  • Similar to bar charts, but in candlestick charts, a bearish reversal pin bar is called by various names such as inverted hammer, long wicked doji, long wicked gravestone, or shooting star. A bullish reversal pin bar is called a hammer, long wicked doji, or long wicked dragonfly.

Time Frame and Strength of Pin Bar Formations:

  • Pin bar formations can work on various time frames but are most powerful on daily, weekly, and 4-hour time frames.

By understanding the characteristics and patterns of pin bar formations, traders can use this method as part of their technical analysis to identify potential profitable entry and exit points in forex trading.


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