Thursday, November 15, 2012

Pin Bars


The Pin is a reversal pattern that indicates a change of trend.
The term “Pin Bar” is an abbreviation for the term “Pinocchio Bar”. It is a 3 bar pattern with the high of the middle bar towering over the highs of the bars on both the left and the right. The middle bar should look like a pin, standing out like the proverbial sore thumb. The pin bar will signal both bullish and bearish trends.




















 Examples of the Pin Bar Formation in Action:

Please notice how the middle bar for both the bullish and bearish pin bars stand out between both the candles on the left and the right.

























How to Trade a Pin Bar Formation
To effectively trade the pin bar formation, you need to first make sure it is well-defined, (see above characteristics). Do not trade just any bar with a large wick. You want the nose of the bar to really stick out and preferably, you want to be trading in the direction of the overall trend.

For a Bearish pin bar:
  • sell on a break of the pin bar low, and
  • place a stop loss 1 pip above the pin bar high.




For a Bullish pin bar:
  •  buy the break of the pin bar high
  •  set the stop loss 1 pip below the pin bar low.





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