Learn To Trade The FX Market

Trading Strategy: Inside Bar Breakouts Part 3

<div dir="ltr" style="text-align: left;" trbidi="on">
In the final part of our series on the Inside Bar Breakout strategy 
for trading Forex, we shall be revealing how to interpret patterns of 
multiple inside bars, and understand the breakout traps that form an 
essential part of trading this strategy effectively.<br />

<strong>Multiple Inside Bars</strong><br />

At key support levels, the major market participants tend to begin a 
process of distribution, and at key resistance levels they tend to start
 the process of accumulation. These processes can last for several days,
 with the range getting smaller from day to day, and this can result in a
 phenomenon known as ‘multiple inside days’.<br />

The longer the consolidation, the longer the movement after the 
breakout is likely to be. Therefore, multiple inside days present an 
excellent trading opportunity, because the breakout tends to lead to big
 movement in price.<br />

While the profit potential is greater with multiple inside days, the 
chances of being wrong-footed by these formations is also greater. The 
key to successfully trading these patterns is to understand the 
psychology that underpins the formation of multiple inside days, and the
 breakout that follows them.<br />

The most reliable method of trading these patterns is to trade the 
breakout of the initial inside bar – providing it has the momentum to 
follow through – and place the stop just below or just above the first 
inside bar depending on whether it is a long or short position.<br />

<div class="wp-caption alignnone" id="attachment_30002" style="width: 680px;">
<img alt="In an ongoing downtrend, the price consolidates for more than a week before forming 3 consecutive inside days (bar 1, 2, and 3)Following the strategy of trading with the trend, a short order is place just below the low of the first inside day, and the stop is placed just above the high. Note that the breakout has a high momentum." class=" wp-image-30002  " data-lazy-loaded="true" height="391" src="http://www.tradersdna.com/wp-content/uploads/2013/09/multiple-inside-bars.jpg" style="display: block;" width="670" /><div class="wp-caption-text">
In an ongoing downtrend, the price consolidates for more than a week before forming 3 consecutive inside days (bar 1, 2, and 3)</div>
Following the strategy of trading with the trend, a short order is 
place just below the low of the first inside day, and the stop is placed
 just above the high. Note that the breakout has a high momentum.</div>
<strong>Understanding Breakout Traps</strong><br />

In order to trade this strategy effectively, you need to understand 
the phenomenon of breakout traps, and learn how to avoid getting caught 
up in them. Breakout traps occur when the price breaks out in one 
direction, and a lot of big players jump on the trend in the direction 
of the breakout. This is followed by a reversal and a breakout with 
momentum in the opposite direction to the initial breakout.<br />

This usually means that traders who entered their positions on the 
first breakout are trapped in a bad trade, but there are ways that you 
can avoid this fate. Firstly, you should always trade with the trend, as
 we have already emphasised. Secondly, you should steer clear of making 
long trades in a strong resistance area, and also avoid making short 
trades in a strong support area. Trading the breakouts against the trend
 is also to be avoided, as these breakouts are more likely to form 
breakout traps. An alternative approach to this would be to wait for the
 breakout of key areas to be retested, as this will mean that you avoid 
getting stuck in the bad trade.<br />

<div class="wp-caption alignnone" id="attachment_30003" style="width: 680px;">
<img alt="A key long-term support areaSource: Forexcrunch" class="size-full wp-image-30003" data-lazy-loaded="true" height="364" src="http://www.tradersdna.com/wp-content/uploads/2013/09/The-chart-depicts-a-key-support-area-670x364.png" style="display: block;" width="670" /><div class="wp-caption-text">
A key long-term support area<br />Source: Forexcrunch</div>
</div>
<div class="wp-caption alignnone" id="attachment_30004" style="width: 680px;">
<img alt="A magnification of the area shown on the chart above, illustrating the process of a breakout trap.Source: Forexcrunch" class="size-full wp-image-30004" data-lazy-loaded="true" height="372" src="http://www.tradersdna.com/wp-content/uploads/2013/09/The-chart-shows-a-process-of-breakout-trap-670x372.png" style="display: block;" width="670" /><div class="wp-caption-text">
A magnification of the area shown on the chart above, illustrating the process of a breakout trap.<br />Source: Forexcrunch</div>
</div>
<strong>Conclusion</strong><br />

The Inside Bar breakout strategy can be a very powerful – not to 
mention profitable – trading technique when you follow the rules set 
down in this series and apply appropriate diligence to each trade. 
Inside bars are very common, and you need to be able to discern the ones
 that expose you to high risk trades from the more reliable types, as 
well as avoiding getting caught in a breakout trap.<br />

The key to success with this strategy is patience, which takes 
discipline. It’s better to keep an eye on the market for a long time and
 wait for inside bars that exhibit the kind of low-risk / high reward 
characteristics that make for consistently profitable trades, rather 
than jumping on every single one that comes your way. Unless you are 
extremely lucky, it is inevitable that some of these trades will turn 
out to be losing trades, but if you stick to trading only those 
opportunities with a high risk/reward ratio, the size of the wins from 
these trades should compensate for any losses that you incur along the 
way.</div>

Trading Strategy: Inside Bar Breakouts Part 3

In the final part of our series on the Inside Bar Breakout strategy for trading Forex, we shall be revealing how to interpret patterns of ...

Trading Strategy: Inside Bar Breakouts Part 2

<div dir="ltr" style="text-align: left;" trbidi="on">
In the previous instalment of our guide to Inside Bar Breakout 
Strategy, we showed you how to recognise the various types of inside bar
 candlestick formations, and what they represent. Today, we’ll be taking
 a look at some techniques for discerning reliable inside bar patterns, 
and give you some guidelines for trading them.<br />

Finding Reliable Inside Bars<br />

Because an inside bar can easily mislead, it’s important to be 
vigilant about discerning between reliable and unreliable inside bars. 
To this end, there are several criteria that you should observe when 
evaluating these patterns, namely the time frame, trend, and liquidity.<br />

Time frame: There are several reasons why you should only trade 
inside bars based on a daily time frame. Most importantly, daily inside 
bars are more reliable than hourly or weekly ones, and the frequency of 
their formation is optimal for detecting the trends that they may be 
heralding. They also help to discipline your trading so that you don’t 
make too many trades in a short space of time, and this time frame 
requires less in the way of monitoring and constant attention.<br />

Trend: Although inside bars can often signal a reversal, trading 
reversals tends to be a lot riskier than trading with the trend. Trading
 in the direction of the trend minimises risk and magnifies gains, so if
 the major daily trend is long, you should only trade inside bars on the
 long side and steer clear of opening short positions. Remember, in the 
forex market, the trend is merely an expression of what the major 
institutional investors, who have the biggest influence on price, are 
thinking. Therefore, you should only trade inside bars in the direction 
of the prevailing trend.<br />

Liquidity: As we touched on briefly in the last instalment, the 
inside bars that are formed during periods of low liquidity are the 
least reliable of all. Rather than signalling a process of accumulation 
and distribution, these inside bars merely indicate that there is not 
much trading activity occurring. The drop in volume that can occur 
during US bank holidays, for example, or any other days when the major 
market participants might not be trading, causes the range to shrink and
 the chart to start printing inside bars. These are not reliable 
indicators of future price movement, and should not be traded under any 
circumstances.<br />

<strong>Trading the Inside Bars</strong><br />

It’s important when trading any strategy to know the points at which 
you are going to get into the trade, and the point at which you should 
exit the trade if it does not work out as planned. It is also important 
to have a good idea of the risk/reward ratio of the trade in question.<br />

The best place to enter a trade of this type is on the breakout of an
 inside bar, in the direction of the trend. So, if the overall trend is 
upwards, you would enter a long position with the breakout on the upper 
side.<br />

Of course, many breakouts turn out to be false, but there are ways to
 minimise your risk of being caught out in this way. Crucially, you need
 to be aware of the momentum of the move, as most breakouts that lack 
momentum turn out to be false breakouts. What we are looking for is a 
strong, steep move in the direction of the breakout. To get a clearer 
picture of the momentum, scale down to smaller timeframes such as 4 
hour, 2 hour, and 1 hour charts.<br />

<div class="wp-caption alignnone" id="attachment_29991" style="width: 680px;">
<img alt="An example of how to use an inside bar to set stop and entry levelsSource: Forexcrunch" class="size-full wp-image-29991" data-lazy-loaded="true" height="479" src="http://www.tradersdna.com/wp-content/uploads/2013/09/When-the-price-breaks-high-of-the-Inside-day-the-long-entry-is-taken-placing-the-stop-just-below-the-low-of-the-Inside-Day-670x479.png" style="display: block;" width="670" /><div class="wp-caption-text">
An example of how to use an inside bar to set stop and entry levels<br />Source: Forexcrunch</div>
</div>
When placing stops on this type of trade, it is important to put them
 in the right places, and these are usually on either side of the inside
 bar depending on the type of position you are taking. So, if you are 
going long, you should place the stops just below the bottom of the 
inside bar. Conversely, when going short, you should place them just 
above the top of the inside bar. This makes it very easy to choose where
 to put the stops.<br />

<div class="wp-caption alignnone" id="attachment_29992" style="width: 680px;">
<img alt="A-reward-of-2000-pips-for-a-risk-of-70-pips-comes-to-Risk-reward-ratio-of-almost-1-to-30-670x411" class=" wp-image-29992" data-lazy-loaded="true" height="411" src="http://www.tradersdna.com/wp-content/uploads/2013/09/A-reward-of-2000-pips-for-a-risk-of-70-pips-comes-to-Risk-reward-ratio-of-almost-1-to-30-670x411.png" style="display: block;" width="670" /><div class="wp-caption-text">
A reward of 2000 pips for a risk of 70 pips gives a remarkable risk/reward ratio of nearly 1:30.<br />Source: Forexcrunch</div>
</div>
The basic objective of any trader is to reduce the risk and magnify 
the gains to the maximum possible extent. When traded properly, the 
risk/reward ratio for this strategy tends to range between 1:5 and 1:10,
 which should theoretically make it possible to wipe out 5 to 10 
consecutive losses with just one successful trade.<br />

In the third and final instalment of our series on Inside Bar 
Breakout strategy for FX traders, we shall be looking at what multiple 
inside bars signify, and also show you how to understand and overcome 
breakout traps.</div>

Trading Strategy: Inside Bar Breakouts Part 2

In the previous instalment of our guide to Inside Bar Breakout Strategy, we showed you how to recognise the various types of inside bar c...

Trading Strategy: Inside Bar Breakouts Part 1

<div dir="ltr" style="text-align: left;" trbidi="on">
<em>In the first part of our series on trading Inside Bar patterns, 
we shall explain how to identify these candlestick formations, both in 
isolation and in the context of the wider moves that they can help to 
identify.</em><br />

The idea behind this strategy is to spot consolidation patterns at 
key support and resistance levels in daily candlestick charts, which 
often precede a breakout. This is one of the simplest strategies to 
grasp the basics of, but it can also be one of the most effective – 
particularly if you are disciplined and careful in your application of 
it.<br />

It should be emphasised before we begin that this strategy is 
intended for use with daily charts, and in every example, a single bar 
represents a day of trading.<br />

<strong>What is an Inside Bar?</strong><br />

Inside Bars are candlestick patterns that form when an entire bar’s 
price action range (eg Open, Low, High and Close) takes place within the
 high and low of the previous bar. This means that the highest price on 
the inside bar is lower than the highest price on the previous day, and 
the lowest price is higher than the previous day’s low.<br />

<div class="wp-caption alignnone" id="attachment_29972" style="width: 407px;">
<img alt="Bar A: The 'Preceding Bar' or 'Mother Bar'Bar B: The 'Inside Bar'" class="size-full wp-image-29972" data-lazy-loaded="true" height="300" src="http://www.tradersdna.com/wp-content/uploads/2013/09/Anatomy-of-an-Inside-Bar1.png" style="display: block;" width="397" /><div class="wp-caption-text">
Bar A: The ‘Preceding Bar’ or ‘Mother Bar’<br />Bar B: The ‘Inside Bar’</div>
</div>
<strong>When do Inside Bars Occur?</strong><br />

<strong>Reversals:</strong> When the price action hits a point of 
strong resistance, the major market participants tend to start locking 
in their profits by closing their open positions, with bears building 
short positions and buyers covering their long positions. This exchange 
takes place within a relatively small price area, often resulting in the
 formation of an inside bar.<br />

In the chart below, we can see that after a long upwards move, the 
price is re-tested at a strong resistance level, forming an inside bar. 
The downside of this breakout then leads to a steep reversal.<br />

<div class="wp-caption alignnone" id="attachment_29973" style="width: 680px;">
<img alt="Inside Bar at a key resistance level, followed by a prolonged reversalSource: ForexCrunch" class="size-full wp-image-29973" data-lazy-loaded="true" height="380" src="http://www.tradersdna.com/wp-content/uploads/2013/09/Inside-Bar-at-a-key-resistance-area-resulting-in-strong-reversal-670x380.png" style="display: block;" width="670" /><div class="wp-caption-text">
Inside Bar at a key resistance level, followed by a prolonged reversal<br />Source: ForexCrunch</div>
</div>
The converse can happen when the price action hits a strong support 
area, which can lead to the bulls building long positions and the bears 
start covering their short positions. This can lead to the formation of 
an inside bar, followed by a strong upside reversal, as in the chart 
below:<br />

<div class="wp-caption alignnone" id="attachment_29974" style="width: 680px;">
<img alt="An Inside Bar at a strong support level, leading to a strong upside reversalSource: ForexCrunch" class="size-full wp-image-29974" data-lazy-loaded="true" height="383" src="http://www.tradersdna.com/wp-content/uploads/2013/09/Inside-Bar-at-a-key-support-area-resulting-in-strong-reversal-670x383.png" style="display: block;" width="670" /><div class="wp-caption-text">
An Inside Bar at a strong support level, leading to a strong upside reversal<br />Source: ForexCrunch</div>
</div>
<strong>Breakouts:</strong> Key resistance and support levels are 
only broken when there are a lot of traders willing to bid above 
resistance or below support levels. Therefore, before a strong breakout,
 there is often a period of consolidation where the buyers and sellers 
build their positions for a potential breakout. It is common to have 
inside bars in these areas of consolidation before a strong breakout 
from key support or resistance levels.<br />

In the chart below, multiple inside bars represent the process of 
accumulation before the price breaks through the key resistance area:<br />

<div class="wp-caption alignnone" id="attachment_29975" style="width: 680px;">
<img alt="Inside Bars forming at the resistance level followed by a breakoutSource: ForexCrunch" class="size-full wp-image-29975" data-lazy-loaded="true" height="381" src="http://www.tradersdna.com/wp-content/uploads/2013/09/Inside-Bars-forming-at-a-breakout-area-and-then-the-price-breaking-the-Key-resistance-with-momentum-670x381.png" style="display: block;" width="670" /><div class="wp-caption-text">
Inside Bars forming at the resistance level followed by a breakout<br />Source: ForexCrunch</div>
</div>
<strong>Consolidation:</strong> After the price has made a strong 
move in a single direction, it tends to halt and enter a process of 
consolidation before continuing to move in the same direction. This 
consolidation occurs because:<br />

<ul>
<li>Traders who are sitting on profitable trades want to cover their 
positions by locking in profits, or add to their profitable positions</li>
<li>Traders who are sitting on losing trades want to cover their losses by closing positions and taking opposing ones.</li>
<li>Traders who missed the initial move now want to open new positions</li>
</ul>
When there are so many parties involved in an exchange of hands at a 
key price level, it tends to lead to a big consolidation, represented by
 an inside bar. Often, inside bars occur after a strong initial price 
rally or decline, and these types of inside bars can be considered 
indicators of consolidation.<br />

<div class="wp-caption alignnone" id="attachment_29976" style="width: 680px;">
<img alt="After a few days of consecutive rises, the price consolidates, forming an inside bar. This indicates accumulation before the next phase of the rally.Source: ForexCrunch" class="size-full wp-image-29976" data-lazy-loaded="true" height="448" src="http://www.tradersdna.com/wp-content/uploads/2013/09/price-makes-second-round-of-rally-and-forms-an-Inside-bar-indicating-accumulation-before-next-leg-of-up-move-670x448.png" style="display: block;" width="670" /><div class="wp-caption-text">
After
 a few days of consecutive rises, the price consolidates, forming an 
inside bar. This indicates accumulation before the next phase of the 
rally.<br />Source: ForexCrunch</div>
</div>
<strong>Ranging markets: </strong>When the major market participants 
lose interest in the market, liquidity decreases dramatically and the 
price ceases to make any major moves, leading the market to trade within
 a narrow range. This can be called a ‘period of indecision’, as neither
 big buyers or big sellers are willing to enter the market. Inside bars 
tend to be very prevalent during this period, as you can see from the 
chart below, and traders should exercise caution when presented with 
inside bars of this type.<br />

<div class="wp-caption alignnone" id="attachment_29977" style="width: 680px;">
<img alt="A market going into a low liquidity / range trading period, indicated by lots of inside bars within a short time frame." class="size-full wp-image-29977" data-lazy-loaded="true" height="506" src="http://www.tradersdna.com/wp-content/uploads/2013/09/range-trading-inside-bars.jpg" style="display: block;" width="670" /><div class="wp-caption-text">
A market going into a low liquidity / range trading period, indicated by lots of inside bars within a short time frame.</div>
</div>
The length of this period depends on various factors, but it usually 
continues until a market-moving event (such as the US Nonfarm Payroll 
release) prompts institutional traders back into the market.<br />

<em>In the next instalment of our guide to trading Inside Bar 
Breakouts, we shall be looking at the various ways in which you can find
 reliable inside bars, and look at strategies for trading these 
formations.</em></div>

Trading Strategy: Inside Bar Breakouts Part 1

In the first part of our series on trading Inside Bar patterns, we shall explain how to identify these candlestick formations, both in is...

The Pin Bar forex trading method

<div dir="ltr" style="text-align: left;" trbidi="on">
<h2 class="title">
Introduction</h2>
The formation of a pin bar is in fact a trend reversal which 
consists of 3 bars. The term "Pin Bar" is an abbreviation of the term 
"Pinocchio Bar". Let's take a look at how a pin bar is formed and how we
 can make money from it in the forex market. <br />
 
<h2 class="title">
What is a pin bar?</h2>
To be precise, a pin bar is the middle bar in a three-bar formation 
which can be found in a bar chart or a candlestick charts. Typically, 
traders tend to prefer the candlestick chart version, which is 
considered to be visually superior for observing price action, however, 
we will initially discuss the formation of pin bars on a standard bar 
chart.<br />
 
<h2 class="title">
Characteristics of a pin bar formation</h2>
The opening and closing of a pin bar are very close to each other 
and near one end of the bar.
The wick of the pin bar sticks out far beyond both bars 1 and 3. The 
longer the wick is, the better the quality of the formation. <br />
 <div class="center">
<img alt="Pin Bar forex strategy" height="380" src="http://www.forex-central.net/img/strategies/Pin-bar-forex-strategy2.jpg" width="599" /></div>
<h2 class="title">
Examples of pin bar formations</h2>
Here is a daily chart of USD/JPY currency pair, we see many pin bar formations that work very well.<br />
<div class="center">
<img alt="Pin Bar trading technique" height="332" src="http://www.forex-central.net/img/strategies/pin-bar-forex-strategy2-2eurusddaily.gif" width="342" /><br />
</div>
<div class="center">
<em>EUR/USD Daily chart</em></div>
Below is a daily chart of the USD/CAD currency pair. After a 3-week 
bullish streak, we see a perfect pin bar formation which leads to a 
significant  trend reversal.<br />
<div class="center">
<img alt="Pin Bar trading technique" height="329" src="http://www.forex-central.net/img/strategies/Pin-bar-forex-strategy2-3USDCADdaily.jpg" width="510" /></div>
Here is an example of a trending bull market where several 
profitable pin bar configurations appear. The following EUR/USD daily 
chart shows that pin bars that are taken along with the dominant trend 
can be very accurate and rewarding.<br />
<div class="center">
<img alt="Pin Bar forex trading strategy" height="432" src="http://www.forex-central.net/img/strategies/pin-bar-setup.jpg" width="517" /></div>
<h2 class="title">
How to trade a pin bar formation</h2>
<span class="img-presentation"><img alt="Pin bar forex method" height="126" src="http://www.forex-central.net/img/strategies/Pin-bar-forex-strategy2-5.jpg" width="156" /></span> To trade a pin bar correctly, you must first make sure that it is well defined (see the above description). <br />
   <br />
  Then, try to only trade  pin bars that are in agreement with another 
signal. In general, pin bars that are traded in agreement with a 
dominant trend are the best. Nevertheless, there are many profitable pin
 bars that occur within markets that are in a tight range or at major 
trend reversal levels. Also, try to combine the pin bar formation with 
support and resistance levels, trend lines, Fibonacci retracement levels
 or moving averages. <br />
  <br />
  A pin bar formation is a trend reversal setup, so for a bearish bin 
bar formation such as the one featured in the small picture above, we 
will sell once the pin bar's low has been broken through and we will put
 a stop loss 1 pip above the pin bar's wick. And for a bullish pin bar 
formation, we'll buy a break above the pin bar with a stop loss 1 pip 
below the pin bar's low.<br />

<h2 class="title">
Pin bar formations with candlesticks </h2>
The formation of pin bars with candlestick charts is pretty much the
 same except for the terms that are used, which are slightly different. A
 bearish trend reversal represented by the formation of a pin bar can be
 referred to as an inverted hammer, a doji, a tombstone, or a shooting 
star.
A bullish trend reversal with a pin bar formation can be called a 
hammer, a doji or a doji dragon. <br />
<div class="center">
<img alt="Pin Bar forex technique" height="282" src="http://www.forex-central.net/img/strategies/Pin-bar-forex-strategy2-6AUDUSD30min.jpg" width="247" /></div>
<h2 class="title">
Summary</h2>
Pin bar formations can be a very profitable tool in your arsenal of 
forex trading setups. The best pin bars setups are those that are in 
confluence with other signals such as support and resistance levels, the
 confirmation of a dominant trend, or other confirming signals. Look for
 pin bar formations that match all of the characteristics listed on this
 page, leaving aside those  you don't trust. Pin bars work in all 
timeframes, but they are especially effective on 4-hour, daily and 
weekly charts.</div>

The Pin Bar forex trading method

Introduction The formation of a pin bar is in fact a trend reversal which consists of 3 bars. The term "Pin Bar" is an abbrevi...

The Pin Bar: One of the Most Powerful Price Patterns in Forex Trading

<div dir="ltr" style="text-align: left;" trbidi="on">
Are you tired of trying to be a scalper and continually getting 
scalped by the market?  Perhaps the quick action of the 1-Minute and 
5-Minute charts is a bit too much.  In fact, trading those lower 
timeframes can be very difficult, even for the most seasoned 
professional traders.  <a href="http://www.forextraders.com/forex-strategy/forex-scalping.html">We have an excellent guide on scalping.</a> 
 One of the easiest things many new traders can do to increase their 
winning percentage and profits is to simply step back and begin trading 
on higher timeframes such as the Daily, 4 Hour, and 1 Hour Charts.  By 
stepping back and trading off these higher timeframes, new traders will 
find a much less stressful style of trading as there is no need to sit 
in front of the computer and watch tick by tick as price moves against 
you a few pips, and then for you, and then against you yet again.<br /><br />The
 transition from trading lower timeframes to higher timeframes can be a 
bit difficult at first for newer traders.  First of all, higher 
timeframes will require more patience.  Price pattern set-ups will not 
occur as frequently, and when they do, profits may not come as fast.  
Generally, trading off of higher timeframes may not be as "exciting" as 
trading tick-by-tick on the lower timeframes.  However, common technical
 analysis tells us that signals off higher timeframes tend to be more 
reliable than signals off lower timeframes because the higher timeframe 
signals are produced by a larger set of data.  In this article, we are 
going to discuss one of the highest probability trading strategies in 
the FX Market-the Pin Bar.<br />

<strong>ForexTraders.com provides exclusive bonus offers from some of the best forex and binary options brokers. <a href="http://www.forextraders.com/exclusive-binary-forex-deals.html">Get your exclusive bonus deal today!</a></strong><br />

<h2>
<strong>Pin Bar History & Definition </strong></h2>
In his book Pring on Price Patterns, Martin Pring discussed a 
candlestick formation he coined the "Pinnochio Bar."  The Pinnochio Bar,
 or pin bar, tends to offer very reliable reversal signals when 
identified and traded properly.  Before we go on, here is a picture of a
 pin bar:<br />

Pring used the original term "Pinnochio Bar" because this candle is 
like Pinnochio's nose.  Let's assume the picture above is a 1 Hour 
Candlestick.  As price moved up during the 1 Hour period, it appeared 
that bulls were in complete control of the market, but then at some 
point during this 1 Hour period, sellers were able to come in with great
 fury and not only hold the buyers off from pushing price higher, but 
they actually came in and took complete control of the trading period.  
By the end of the 1 Hour session, sellers had completely erased all of 
the gains that buyers had made, and they were even able to push price 
below the period open so that the candle closed red, which proves that 
sellers are now completely in control of the market.<br /><br />The 
psychology behind the candle is that price "lied" to us.  It tried to 
convince us it was moving higher, but in reality, price moved much lower
 by the end of the session; thus, the name "Pinnochio," or pin bar.  
These pin bars are a powerful reversal signal when they form in the 
correct manner and location.<br />

<h2>
<strong>Not All Pin Bars Are Created Equal</strong></h2>
<strong>The best pin bars will close below the open if the wick is to the upside, or above the open if the wick is to the downside.</strong> 
 In the picture above, you can see that the candlestick closed the 1 
Hour trading session below the open; thus, it closed as a red candle.  
That is what you want to see.  If there has been a nice move up in price
 and the pin bar forms at the top of the move with a big wick to the 
upside, you want the candle to close red, as in the picture above.  
However, if price has made a nice downmove and a pin bar forms at the 
low of the move, with a big wick to the downside, then the body should 
close green.<br /><br />If a pin bar does not quite do this, it can still be
 okay, but be assured that the very best ones will close in the manner 
just described.  And always remember, trading only the best pin bars 
will offer you the highest probability of trading success.<br /><br /><strong>The body of a pin bar must be no more than 20% of the measurement of the body to the tip of the wick</strong>. 
 Therefore, if the body is 8 pips and body to end of wick is 25 pips, 
the candlestick would not be classified as a perfect pin bar.  If the 
wick to body is 100 pips, then the body should be no more than 20% of 
100 pips, or 20 pips.  If it is a few pips more, it can be okay, but is 
should be very close to 20 pips or less.<br /><br /><strong>The nose should not be very long at all.</strong> 
 If the nose is to long, the candlestick will form what is called a 
doji, which is a candlestick with a  small body and equal length wicks 
on each side.  A perfect pin bar will have a very long wick on 1 side 
and a very small wick, or even no wick, on the other side.<br /><br /><strong>Location is of extreme importance.</strong> 
 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 much less reliable.  Ideally, there should be no 
candles to the immediate left of a pin bar wick.  Instead, there should 
only be open space.  Let's examine a few pictures.<br />

<h2>
<strong>DON'T TAKE THESE!!!!!!</strong></h2>
<img alt="" class="center" height="325" src="http://www.forextraders.com/assets/blog-images/_resampled/resizedimage450325-PBforms.gif" title="" width="450" /><br />The
 above pic is an example of a perfect pin bar forming in the middle of 
consolidation.  Even if the pin bar's form is perfect, as the one in the
 above pic is, it has to form in the proper location!!  This one does 
not, so you should not trade it.  You must find pin bars that form at 
the top and bottom of moves.<br /> <img alt="" class="center" height="325" src="http://www.forextraders.com/assets/blog-images/_resampled/resizedimage450325-PBbottom.gif" title="" width="450" /><br /><br />In
 the above picture, you can see that the pin bar forms at the bottom of 
an extended move.  This is where you want a pin bar to form.<br /><br />The 
next important aspect of the pin bar is making sure it forms at a key 
area of support/resistance.  You don't want to trade them in random 
price locations.  They should be forming on key areas of 
support/resistance as identified through common technical analysis.  
They should be confirming a price reversal.<br />

<h2>
<strong>Entry and Exit</strong></h2>
Entry on is always on the break of the nose by 2-3 pips and the stop loss is always placed 2-3 pips beyond the tip of the wick.<br /><br />Pin
 Bars are not a magical formula that will produce endless pips with no 
effort.  They are simply a price pattern that when traded properly can 
combine with other forms of technical analysis to provide very high 
probable set-ups in the FX Market.</div>

The Pin Bar: One of the Most Powerful Price Patterns in Forex Trading

Are you tired of trying to be a scalper and continually getting scalped by the market? Perhaps the quick action of the 1-Minute and 5-Mi...

Pinocchio Bar Trade Setup (Pin Bar)

<div dir="ltr" style="text-align: left;" trbidi="on">
The Pinocchio bar (pin bar) is a very popular price pattern among active traders. In Martin Pring’s <a href="http://www.amazon.com/gp/product/0071381937/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0071381937&linkCode=as2&tag=tradseturevi-20" target="_blank">“Technical Analysis Explained”</a>, he called the pattern Pinocchio because it lies.<br />
It lies about the market direction. And its long nose exposes the lie.<br />
So we expose the pin bar below.<br />
<div class="wp-caption alignnone" id="attachment_1874" style="width: 760px;">
<img alt="Pin Bar Example" class="size-full wp-image-1874" data-lazy-loaded="true" height="421" src="http://www.tradingsetupsreview.com/wp-content/uploads/2013/11/Pin-Bar-Example.png?cf9b13" style="display: inline;" width="750" /><div class="wp-caption-text">
Bearish Pin Bar</div>
</div>
The
 concept behind pin bars explains its efficacy. Traders place their 
entry orders and stop orders at support and resistance levels. Pin bars,
 by making a short-lived break of the levels, give false hope to traders
 in the wrong direction. As the pin bar closes back within the support 
or resistance, prices make a run for the other direction.<br />
<h2>
Rules for Long</h2>
<ol>
<li>Bar opens above support</li>
<li>Bar trades below support for most of the range of the bar</li>
<li>Bar closes above support</li>
</ol>
<h2>
Rules for Short</h2>
<ol>
<li>Bar opens below resistance</li>
<li>Bar trades above resistance for most of the range of the bar</li>
<li>Bar closes below support</li>
</ol>
<h2>
Winning Trade</h2>
<a href="http://www.tradingsetupsreview.com/wp-content/uploads/2013/11/Pinocchio-Bar-Winning-Trade.png?cf9b13" rel="lightbox[1857]"><img alt="Pin Bar Winning Trade" class="alignnone size-home-top wp-image-1858" data-lazy-loaded="true" height="396" src="http://www.tradingsetupsreview.com/wp-content/uploads/2013/11/Pinocchio-Bar-Winning-Trade-750x396.png?cf9b13" style="display: inline;" width="750" /></a><br /> This daily chart of AT&T shows a pin bar that began a swift down trend.<br />
<ol>
<li>There was an existing up trend followed by a <a href="http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:cup_with_handle_cont" target="_blank" title="Cup and Handle Pattern">cup and handle pattern</a> that signaled the bull trend to continue.</li>
<li>However,
 the cup and handle formation failed quickly with a pin bar that poked 
above the “cup rim” before closing below the resistance.</li>
<li>After 
the pin bar triggered a short entry, prices tried to move up but could 
not gain momentum despite several tries. In fact, it was better to wait 
and enter after the failed attempts to move up.</li>
</ol>
<h2>
Losing Trade</h2>
<a href="http://www.tradingsetupsreview.com/wp-content/uploads/2013/11/Pinocchio-Bar-Losing-Trade.png?cf9b13" rel="lightbox[1857]"><img alt="Pin Bar Losing Trade" class="alignnone size-home-top wp-image-1869" data-lazy-loaded="true" height="396" src="http://www.tradingsetupsreview.com/wp-content/uploads/2013/11/Pinocchio-Bar-Losing-Trade-750x396.png?cf9b13" style="display: inline;" width="750" /></a><br />
 This is a 5-minute chart of E-mini futures on NASDAQ 100. We included 
part of the previous and next trading sessions to highlight the context 
of the trade.<br />
<ol>
<li>After a prolong congestion, prices broke down strongly and stopped at yesterday’s low with a two-bar reversal pattern.</li>
<li>The
 pin bar was the second test of the low of yesterday’s session. Given 
that it was the second test of yesterday’s low, it was a good trade. 
However, we got stopped out quickly.</li>
<li>After a final thrust down, 
prices drifted up and gapped up the next day to continue its way up. 
Indeed, there was buying pressure below the support tested by the pin 
bar. However, the pin bar was not the ideal entry point in this case.</li>
</ol>
<h2>
Review – Pinocchio Bar Trade Setup (Pin Bar)</h2>
<strong>A
 pin bar is a unique price pattern because it is not defined by one, 
two, or even three bars. It is defined by the entire market structure.</strong><br />
We can only label a pin bar after looking at support or resistance levels that it penetrated.<br />
Given
 the right context, the pin bar offers a reliable point of entry. Focus 
on pin bars that penetrate major support or resistance. Then, find 
confirmation from other indicators or chart patterns, and you have a 
high probability trade.<br />
When confirmation is lacking, it is a good
 idea to delay your entry. Let more price action unfold after the pin 
bar and enter if it confirms the pin bar.<br />
Get a free indicator for five price action patterns including pin bar <a href="http://www.tradingsetupsreview.com/price-action-pattern-indicator-ninjatrader/" title="Price Action Pattern Indicator For Ninjatrader">here</a>.<br />
You should refer to <a href="http://www.amazon.com/gp/product/0071381937/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0071381937&linkCode=as2&tag=tradseturevi-20" target="_blank" title="Technical Analysis Explained">Martin Pring’s solid work on technical analysis</a> to learn more about the pin bar and other bar patterns.</div>

Pinocchio Bar Trade Setup (Pin Bar)

The Pinocchio bar (pin bar) is a very popular price pattern among active traders. In Martin Pring’s “Technical Analysis Explained” , he cal...

How to Trade Fake Pin Bars

<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="gsstx">
<span class="gsstx">One of the more compelling entry triggers via price action is the Pin Bar.  </span>
</div>
<div class="gsstx">
<span class="gsstx">Pin Bar, which is short for ‘Pinocchio Bar,’ is a 
single candlestick setup that clues price action traders into potential 
reversals in the market. A pin bar is an elongated wick that ‘sticks 
out’ from price action. Traders will usually look for one-sided wicks 
that are two times the size of the candlesticks body. </span>
</div>
<div class="gsstx">
<span class="gsstx">When traders see elongated wicks sticking out from 
price action, they can look for the momentum that created the long wick 
to continue by looking for a reversal. </span>
</div>
<div class="gsstx">
<span class="gsstx">So if a trader sees a long wick sticking out below 
price action; they can look to go long. If a trader sees a long wick 
sticking out above price action, they may want to look to go short. </span>
</div>
<img alt="How_to_Trade_Fake_Pin_Bars_body_Picture_2.png, How to Trade Fake Pin Bars" class="gsstx" src="http://media.dailyfx.com/illustrations/2012/04/27/How_to_Trade_Fake_Pin_Bars_body_Picture_2.png" /><div class="gsstx" style="text-align: center;">
<span class="gsstx" style="font-style: italic;">Created with Marketscope/Trading Station</span>
</div>
<div class="gsstx">
<span class="gsstx">Much like Pinocchio’s nose – the elongated wick of a pin bar can tell us that a lie is being told.  </span>
</div>
<div class="gsstx">
<span class="gsstx">But not all long wicks are created equal. As a 
matter of fact, many of these long wicks will not be Pin Bars at all; 
but that does not mean that they can’t be used by Price Action traders. 
This article will walk through how to trade ‘fake’ Pin Bars, or long 
wicks that do not stick out from price action.  </span>
</div>
<div class="gsstx">
<span class="gsstx" style="font-size: 19px; font-weight: bold;">What separates a Pin Bar from a Fake Pin Bar?</span>
</div>
<div class="gsstx">
<span class="gsstx">The difference between a Pin Bar and a Fake Pin Bar is determined by recent price action.  </span>
</div>
<div class="gsstx">
<span class="gsstx">If the long wick sticks out from recent prices, that
 is a Pin Bar. This is the ‘lie’ that the market may be telling us: That
 a movement to a previously untested level has brought a new group of 
buyers (or sellers in the case of a bearish Pin Bar). </span>
</div>
<div class="gsstx">
<span class="gsstx">If the long wick does not stick out from previous 
price action; they are not a genuine Pin Bar, but rather ‘Fake Pin 
Bars.’ The picture below will illustrate with further detail: </span>
</div>
<img alt="How_to_Trade_Fake_Pin_Bars_body_Picture_3.png, How to Trade Fake Pin Bars" class="gsstx" src="http://media.dailyfx.com/illustrations/2012/04/27/How_to_Trade_Fake_Pin_Bars_body_Picture_3.png" /><div class="gsstx" style="text-align: center;">
<span class="gsstx" style="font-style: italic;">Created with Marketscope/Trading Station</span>
</div>
<div class="gsstx">
<span class="gsstx">As you can see above picture, the fake pin bar doesn’t quite stick out from previous and recent price action.  </span>
</div>
<div class="gsstx">
<span class="gsstx">With a genuine pin bar leaving a long wick above the
 candle, traders could look to open a short position to take part in the
 momentum that created the long wick in the first place. </span>
</div>
<div class="gsstx">
<span class="gsstx">However, as you can see from the above setup – that would not have worked out too well.  </span>
</div>
<div class="gsstx">
<span class="gsstx">Trading Fake Pin Bars requires additional analysis, 
as the signal of a short-term reversal in prices may not be as 
consistent as that of a genuine pin bar. </span>
</div>
<div class="gsstx">
<span class="gsstx" style="font-size: 19px; font-weight: bold;">How to Trade Fake Pin Bars</span>
</div>
<div class="gsstx">
<span class="gsstx">The first thing we want to get comfortable with when
 looking for Pin Bars, or Fake Pin Bars, is what it is that we are 
looking to take part in by trading that setup. Let’s take a closer look 
at a legitimate Pin Bar below: </span>
</div>
<img alt="How_to_Trade_Fake_Pin_Bars_body_Picture_4.png, How to Trade Fake Pin Bars" class="gsstx" src="http://media.dailyfx.com/illustrations/2012/04/27/How_to_Trade_Fake_Pin_Bars_body_Picture_4.png" /><div class="gsstx" style="text-align: center;">
<span class="gsstx" style="font-style: italic;">Created with Marketscope/Trading Station</span>
</div>
<div class="gsstx">
<span class="gsstx">From the above graphic, we can see what makes the 
pin bar attractive is the fact that price has reversed enough to leave a
 long wick exposed underneath price action (all taking place during the 
pin bar candle).  </span>
</div>
<div class="gsstx">
<span class="gsstx">But what if a long wick isn’t sitting outside of recent price action?  </span>
</div>
<div class="gsstx">
<span class="gsstx">This might mean that the potential for a reversal on
 fake pin bars could be smaller than that of genuine pin bars. But that 
doesn’t mean that price action traders can’t use this information to our
 advantage – we merely have to qualify which fake pin bars might be 
favorable and which are not.  </span>
</div>
<div class="gsstx">
<span class="gsstx">We can do this by looking at the trend of the 
currency pair, and attempting to enter ONLY in the direction of the 
longer term trend. Traders can even use price action analysis to qualify
 and analyze trends, much like we looked at in our </span><a class="gsstx" href="http://www.dailyfx.com/forex/education/trading_tips/daily_trading_lesson/2011/10/14/Price_action_an_introduction_js.html"><span class="gsstx" style="text-decoration: underline;">Introduction to Price Action</span></a><span class="gsstx">.  </span>
</div>
<div class="gsstx">
<span class="gsstx">To do this, we would want to scroll out on our 
charts and analyze more previous prices than if we are trading a genuine
 pin bar; and the reason for this is so that we can get a better 
assessment of the long-term trend and look to only trade in that 
direction. The picture below will illustrate an up-trend with a bullish 
fake pin bar. </span>
</div>
<img alt="How_to_Trade_Fake_Pin_Bars_body_Picture_5.png, How to Trade Fake Pin Bars" class="gsstx" src="http://media.dailyfx.com/illustrations/2012/04/27/How_to_Trade_Fake_Pin_Bars_body_Picture_5.png" /><div class="gsstx" style="text-align: center;">
<span class="gsstx" style="font-style: italic;">Created with Marketscope/Trading Station</span>
</div>
<div class="gsstx">
<span class="gsstx">From the above graphic, we can see that after price 
had established an up-trend by creating a series of higher highs, and 
higher lows a fast price movement to the downside was corrected before 
the candle had completed (leaving the long wick circled above).  </span>
</div>
<div class="gsstx">
<span class="gsstx">Traders can look to trade this fake pin bar by going
 long after this candle has formed, placing a stop slightly below the 
low of the fake pin bar wick. That way, if price happens to reverse 
against us (and move down while we are in a long position), we can exit 
the position if a lower price is printed below the bottom of the fake 
pin bar wick (picture illustrating further is below): </span>
</div>
<img alt="How_to_Trade_Fake_Pin_Bars_body_Picture_6.png, How to Trade Fake Pin Bars" class="gsstx" src="http://media.dailyfx.com/illustrations/2012/04/27/How_to_Trade_Fake_Pin_Bars_body_Picture_6.png" /><div class="gsstx" style="text-align: center;">
<span class="gsstx" style="font-style: italic;">Created with Marketscope/Trading Station</span>
</div>
</div>

How to Trade Fake Pin Bars

One of the more compelling entry triggers via price action is the Pin Bar. Pin Bar, which is short for ‘Pinocchio Bar,’ is a single c...

Pinbar Trading System

<div dir="ltr" style="text-align: left;" trbidi="on">
 <strong>Pinbar Forex Trading System</strong> — 
a popular strategy for entering and exiting positions that is based on the 
particular candlestick pattern and the following price action. The Pinbar (also
known as <strong>"Pin-bar"</strong> or <strong>"Pin bar"</strong>)
pattern was first introduced by Martin Pring in his Pring on Price Patterns.<br />

<h4>
Features</h4>
<ul>
<li class="green">Conservative strategy offers low-risk high-yield opportunities.</li>
<li class="green">No-loss rate is pretty high if break-even is applied.</li>
<li class="red">Rare occurrence.</li>
<li class="red">Timing is critical.</li>
<li class="red">Support/resistance is difficult to formalize.</li>
</ul>
<h4>
Strategy Set-Up</h4>
Any currency pair and timeframe should work, but longer-term timeframes 
(such as H4, D1 and W1) should work better.<br />

<strong>Pinbar Set-Ups:</strong>
<br />
<img alt="Pinbar Set-Ups" height="328" src="http://www.earnforex.com/forex-strategy/pinbar.png" width="449" /><br />

The pattern consists of three bars: the left eye, the nose and the right eye. 
The left eye should be a bar up for the bearish Pinbar pattern or a bar down for
the bullish pattern. The nose bar should open and close inside the left
eye, but its high (or low, for the bullish set-up) should protrude much farther
than the left eye's high (or low). Both the nose bar's open and close should be
located in the bottom (top, for the bullish set-up) 1/4 of the bar. The right
eye is where the trading happens.<br />

An additional condition for the good pattern set-up is the strong 
support/resistance level formed either behind the eyes or near the point of the 
nose. The stronger are the support/resistance levels you incorporate into this
pattern, the more accurate it will be.<br />

You can use the <a href="http://www.earnforex.com/metatrader-indicators/Pinbar-Detector">MetaTrader 
Pinbar Detector indicator</a> to automate the Pinbar pattern detection.<br />

<h4>
Entry Conditions</h4>
Aggressive entry option is to enter a position
when in the right eye price retreats behind the left eye's close level.<br />

Conservative entry point is below (above for bullish set-up) the nose 
bar.<br />

<h4>
Exit Conditions</h4>
Conservative stop-loss can be set behind the nearest support/resistance level
behind the eyes. A less conservative approach would be to set stop-loss to 
immediately behind the nose bar point (in this case, your reward/risk ratio may 
suffer).<br />

Conservative take-profit can be set immediately after the left eye low (high
for the bullish set-up). Aggressive take-profit level may be placed 
farther — to the next strong support (resistance for bullish 
positions) level.<br />

<h4>
Examples</h4>
<strong>Bearish Pinbar Set-Up:</strong><br />

This is an example of the aggressive set-up. The entry point (blue line) is 
positioned at the left eye close (price retreated for that entry). Stop-loss 
(red line) is placed at behind the point of the nose bar (in this situation, 
even conservative stop-loss wouldn't be hit, as the price pull-back during the 
right eye happened before the entry). Take-profit (green line) is set at the 
nearby support level and is easily filled.<br />

<strong>Bullish Pinbar Set-Up:</strong><br />

This is an example of the conservative set-up. The entry point (blue line) is
placed just behind the nose bar. Stop-loss (red line) is below the left eye. 
Take-profit (green line) is just above the left eye.<br />

<h4>
Warning!</h4>
<div class="notewarning">
Use this strategy at your own risk. EarnForex.com can't be responsible for
any losses associated with using any strategy presented on the site. It's not
recommended to use this strategy on the real account without testing it on demo
first.<br />

</div>
<h4>
Discussion:</h4>
Do you have any suggestions or questions regarding this strategy? You
can always
<a href="http://www.earnforex.com/forum/f9/pinbar-trading-system-8343/">discuss 
Pinbar Trading System</a> with the fellow Forex traders 
on the <a href="http://www.earnforex.com/forum/f9/">Trading 
Systems and Strategies forum</a>.</div>

Pinbar Trading System

Pinbar Forex Trading System — a popular strategy for entering and exiting positions that is based on the particular candlestick pattern...

The Pin Bar Trade Setup

<div dir="ltr" style="text-align: left;" trbidi="on">
The <strong>pin bar trade setup</strong> is the most effective price 
action trade setup there is. It is an extremely powerful setup when used
 correctly. Many trader only trade off of a pin bar formation and they 
are very successful traders. In this lesson you will learn what a pin 
bar is, the characteristics of one, how to trade it and the difference 
between a great pin bar and an average one.<br />

<h3>
What is a Pin Bar?</h3>
A pin bar is short for Pinocchio bar, the reason it is called a 
Pinocchio bar is because it is telling us that the market is lying. What
 that means is that the market price went to a certain level then came 
all the way back to near the opening price. It lied as to where the 
price was going.<br />

A pin bar is made up of a small body and a long wick extending from 
the body. Pin bars are very noticeable and stick out on charts. This 
makes it easy to identify on charts.<br />

<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pin-bar-diagram.jpg"><img alt="Pin Bar " class="aligncenter size-full wp-image-136" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pin-bar-diagram.jpg" style="border: 3px solid black;" width="550" /></a></div>
Pin bars form because the market rejects the prices that it goes to 
and pushes the prices back to the opening price of that candle. This 
shows that the market is running out of steam and is ready for a 
reversal. That is where we get the signal to enter the trade and ride 
the reversal for profit.<br />

<h3>
Characteristics of a Pin Bar</h3>
A pin bar is very easy to notice on a price action chart but not all 
of the ones that look like pin bars actually qualify as a pin bar. There
 are a couple of key characteristics that a pin bar must have to a true 
pin bar.<br />

<div style="text-align: center;">
<strong>Pin Bar Characteristics</strong></div>
<ul>
<li>Wick must be 3 times as big as the body</li>
<li>Wick must be larger than the previous bars and stick out from the rest</li>
<li>Body must be on one end of the wick, not in the middle</li>
<li>Price has to close within the previous candles high or low</li>
<li>The Smaller the body the better, the bigger the wick the better</li>
</ul>
<div style="text-align: center;">
<strong>In the chart below you can see a 
great example of a pin bar. The wick is 3 times as big as the body, it 
sticks out from recent candles and it closes within the previous candles
 low. The body is small and it closes on the end of the wick. Overall 
this is a very good-looking pin bar.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbarex2.png"><img alt="Pin Bar Pattern" class="aligncenter  wp-image-138" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbarex2.png" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: left;">
Now some pin bars are going to be better 
than others, this all depends on its characteristics. For example if the
 body closes closer to the middle than the end of the wick then it isn’t
 going to be as effective of a pin bar as it would have been if it would
 have closes at the end of the wick.</div>
<div style="text-align: left;">
So it is important when looking for pin 
bars that they have all of the characteristics that were named above if 
you want the most effective and profitable trade you can get.</div>
<div style="text-align: left;">
<strong>How To Trade a Pin Bar</strong></div>
<div style="text-align: left;">
Before you even think about making a pin 
bar trade you need to make sure it fits the characteristics of a pin bar
 that were stated above. That is the first thing you should do when you 
think you see a pin bar has formed. Once a pin bar has been confirmed 
you can begin to look at the other parts the trade needs to be taken.</div>
<div style="text-align: left;">
The next thing that should be looked at 
before a trade is whether or not the market is trending or is ranging. 
Knowing this will better help you understand what the market is doing 
and will help you accurately read the market. A pin bar that has formed 
with the trend are the most effective trades but you can also look for 
trend reversals and pin bars in a ranging market. Trading against the 
trend and in a  ranging market is going to trickier but can also pay off
 big time.</div>
<div style="text-align: center;">
<strong>This chart is a downtrend and a 
pin bar forms rejecting higher prices and this indicates it is ready to 
continue its trend downward. </strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-with-trend.png"><img alt="Pin Bar With Trend" class="aligncenter  wp-image-143" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-with-trend.png" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: center;">
<strong>On this chart below we can see 
that a pin bar formed after a major downtrend. The market then reversed 
and shot up. This is the power of a pin bar.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-counter-trend.png"><img alt="Pin Bar Against Trend" class="aligncenter  wp-image-145" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-counter-trend.png" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: center;">
<strong>With the chart below the light 
blue rectangle represents the trading range. Trading when the market is 
ranging is very risky but can also be very profitable. As you can see 
just on this chart there was one pin bar that didn’t work out and one 
that did. The one that did it formed at the bottom of the range and the 
price went all the way to the top of the trading range. </strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-ranging.png"><img alt="Pin Bar in Ranging Market" class="aligncenter  wp-image-148" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-ranging.png" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: left;">
<a href="http://tradingwithpriceaction.com/identify-support-and-resistance-zones/" target="_blank" title="How-To Identify Support and Resistance Zones Using Price Action">Support and resistance zones</a>
 are also key when trading pin bars. The reason for that is because at 
these zone is where we look for pin bars to form. These zones are 
excellent areas for the price to reverse because in the past the prices 
have respected that zone.</div>
<div style="text-align: left;">
Wait for price to get near a support and 
resistance zone then look for a pin bar formation. By trading with 
support and resistance you are greatly enhancing your chances for a 
successful trade because you are reading what the market is giving you.</div>
<div style="text-align: left;">
When prices move up to a resistance zone 
you will be looking for a bearish pin bar. This is your signal to enter 
the trade short.</div>
<div style="text-align: center;">
<strong>With the chart below you can see 
that price moved up to the resistance zone and formed a pin bar. The 
wick went through the resistance zone which shows that the market 
rejected the higher prices. Then the market reversed into a downtrend.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-with-res.png"><img alt="Bearish Pin Bar at Resistance Zone" class="aligncenter  wp-image-153" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-with-res.png" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: left;">
When prices move down to a support zone you will be looking for a bullish pin bar formation for you to go long.</div>
<div style="text-align: center;">
<strong>In the chart below you can see 
that a pin bar formed with a huge wick which penetrated the support 
zone. This is very good sign and shows that the market has run out of 
steam and is ready to reverse trends just as this one did.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-at-support1.png"><img alt="Bullish Pin Bar at Support Zone" class="aligncenter  wp-image-155" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-at-support1.png" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: left;">
The best time to enter a pin bar trade is 
when you have the trend in your favor and it has formed right on a 
support or resistance zone. This is called<em> trading with confluence</em>.</div>
<div style="text-align: left;">
Trading with confluence is the most 
important thing when it comes to having highly successful trades. It 
means that you have at least two things in your favor. We can use in 
trading because we can often have more than two reasons to enter a 
trade. Those reasons could be with trend, at support or resistance zone 
or a trade setup.</div>
<div style="text-align: left;">
When you are able to get all three of those things in your favor you can expect a much higher win percentage on your trades.</div>
<div style="text-align: center;">
<strong>This is a great example of a 
trade that has everything working for it. A bullish pin bar has formed 
at a support and resistance zone and the market is in a uptrend. All 
three are working in your favor which makes for a very high probability 
trade setup.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-with-confluence.png"><img alt="Pin Bar With Confluence" class="aligncenter  wp-image-159" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-with-confluence.png" style="border: 3px solid black;" width="550" /></a></div>
<h3 style="text-align: left;">
Entry and Stop Loss Placement</h3>
The entry point and the stop-loss placement are very important to 
figure out before you make any trade. This way you know your risk that 
you are taking and know where your trade will be entered.<br />

The entry point is very simple to find for a pin bar setup because 
you place it right below the low of a bearish pin bar and right above a 
bullish one. The best way to do this is setup a sell or buy stop order. 
What that means is that once the price gets to a certain level your 
trade will be triggered and you will be in the trade. This provides the 
most accuracy when trading.<br />

<div style="text-align: center;">
<strong>Simple diagram of where to place your sell and buy stop orders for a pin bar trade.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-entry.jpg"><img alt="Pin Bar Entry" class="aligncenter size-full wp-image-163" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-entry.jpg" style="border: 3px solid black;" width="550" /></a></div>
<div style="text-align: left;">
The stop-loss is also very simple to find 
for a pin bar trade. You place the stop-loss right above or below the 
wick of the candle. Placing the stop-loss here will give the trade space
 to work itself out and hopefully move in the direction you had hoped.</div>
<div style="text-align: center;">
<strong>Another really easy to follow diagram of where to place your stop losses when trading a pin bar.</strong></div>
<div style="text-align: center;">
<a href="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-stop-loss.jpg"><img alt="Pin Bar Stop Loss Placement" class="aligncenter size-full wp-image-164" height="400" src="http://tradingwithpriceaction.com/wp-content/uploads/2013/03/pinbar-stop-loss.jpg" style="border: 3px solid black;" width="550" /></a></div>
<h3 style="text-align: left;">
Conclusion</h3>
In conclusion the pin bar is a very valuable tool when it comes to 
trading price action and Forex in general. It is a trade setup that has 
proven over and over again to be a reliable signal to trade. If you take
 your time and learn the ins and outs of a pin bar it is really the only
 trade setup you need to be a successful and profitable trader. Remember
 that not all pin bar setups are created equally and some will be more 
likely to workout then others. By trading with confluence such as 
support and resistance zones and with the trend you will greatly 
increase your chances of a successful trade. Now go test this signal out
 on a demo account until you are comfortable enough with it to trade 
live.<br />

<div style="text-align: left;">
I hope that you have learned a lot in this 
lesson and especially about the pin bar trade setup. If you have any 
questions you can leave a comment below. Also remember to sign up for 
our newsletter below where you will receive free ebooks, get trade 
setups sent to you, free tips and guides. Plus you will receive 
information that wont be on the website.</div>
</div>

The Pin Bar Trade Setup

The pin bar trade setup is the most effective price action trade setup there is. It is an extremely powerful setup when used correctly. ...

Pin Bar Forex Trading Strategy

<div dir="ltr" style="text-align: left;" trbidi="on">
<h1 class="entry-title">
Pin Bar Forex Trading Strategy</h1>
<div class="entry-meta">
      
     </div>
The <a href="http://2ndskiesforex.com/forex-trading-strategies/forex-strategies/pinbar-trading-price-action-forex-trading-with-pinbars/">pin bar trading strategy</a><b>,</b> is
 a price action reversal trade setup that can be used to make money from
 the markets when used correctly. In this lesson we will explain what a 
pin bar is, and how to use one when you see it in the correct manner to 
setup profitable trades in the market.<br />

<b>What is a Pin Bar & How Do You Define It?</b><br />

We all know the story of Pinocchio – the boy whose nose grew longer 
anytime he told a lie. A pin bar is also called a Pinocchio bar because 
it is telling us that the market is lying and the length of the pin 
indicates the elongating nose of Pinocchio.<br />

As the market price moves in the direction of the trend up to a 
certain level, it suddenly retreats all the way back to near the opening
 price. Thus, it lied as to where the price was headed.<br />

A <a href="http://www.dailyfx.com/forex/education/trading_tips/daily_trading_lesson/2011/10/18/priceactionpinbars.html">pin bar reversal pattern</a>,
 is made up of a long wick and a small body, which could extend from 
above or below the body. They are easily identifiable on  your charts 
with a little practice.<br />

The rejection of price direction by traders is what causes price to 
go back towards the opening price of that candle, indicating that the 
traders in the previous trend have run out of steam and that 
counter-trend players have come in.<br />

<b>What Are the Characteristics of A Pin Bar?</b><br />

Here are some easy to follow rules to identify pin bars on your charts;<br />

<ul>
<li>Wick must be at least 3x the length of the body of the candle.</li>
<li>Wick ideally is similar same size as the previous candle (bigger = better).</li>
<li>The closing price must be located within the length of the preceding candle (i.e. not gapping).</li>
<li>A smaller body and longer wicks are preferable</li>
<li>Body must be on one end of the wick, essentially looking like a mallet or hammer</li>
</ul>
<b>How To Trade a Pin Bar Setup</b><br />

The first step is to confirm that the <a href="http://priceactioncourse.com/price-action-forex-pin-bar-trading/">pin bar</a>
 in question matches the characteristics described above. To do this, 
the trader must wait until the candle in question has closed. This is 
the only way the candle can be evaluated to see that it is a true pin 
bar.<br />

The next step is to make sure that the pin bar has formed at the 
bottom or top of a trend, ideally at a key support or resistance level. 
If it forms in a range-bound market, it is rarely of use unless at the 
range highs or lows.<br />

But if the pin bar forms at the top of a trend and this area 
corresponds to market resistance, this is a very good setup for a short 
trade. Similarly, a pin bar which forms at the bottom of a trend at an 
area of support is a good setup for a long trade.<br />

<b><i>Fig2a: Long Entry Setup for Bullish Pinbar on Support Level</i></b><br />

<b>Entry and Stop Loss Placement</b><br />

What are the best ways to enter the trade as well as set stop loss and target settings for the trade?<br />

<b>Entry Point</b><br />

The best bet for an entry is to wait for the open of the next candle 
to initiate the trade. As much as possible, only enter trades where the 
pin bar has formed at the support or resistance level so as to 
strengthen the signal. Use market orders for the trade.<br />

Trade signals that occur on longer term charts tend to be more 
reliable, but take more time to mature for often the same reward to risk
 ratio.<br />

One entry method discussed has been the 50% retrace entry, but statistics show this to be a highly inefficient method.<br />

<b>Stop Loss/Take Profit</b><br />

Place the stop-loss above or below the wick of the candle depending 
on the time frame chart you have chosen. Part of the reason why this 
trade is setup using support and resistance levels is so that a trade 
that moves against the trader will most likely halt its drawdown at the 
key support/resistance before resuming in the trader’s chosen direction.
 As such, stop loss levels should be set below the support for long 
trades, and above the resistance for short trades. The risk management 
profile for the account as well as the risk-reward ratio will determine 
the number of pips used as stop loss. Aim for a minimum reward to risk 
ratio of 1.5:1.<br />

Take Profits should be set as a whole to the nearest key level ahead 
of the trade. On a daily chart, this could translate into a target of 
150 pips for every 100 pips risked. Better reward to risk ratios are 
seen when the trades are properly screened as follows:<br />

a)      Pinbars with long wicks and smaller bodies.<br />

b)      Closing price as close to key level of support/resistance as possible.<br />

The pin bar setups should be practiced on a demo account before being
 applied to a real money trading account. But as a whole, if you can 
learn to add this price action setup to your arsenal, then you will find
 yourself making really good reversal trades and high probability setups
 when you take the price action, setups and context into account.</div>

Pin Bar Forex Trading Strategy

Pin Bar Forex Trading Strategy The pin bar trading strategy , is a price action reversal trade setup that can be used to...