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This pin bar has proven to be effective as one of the main components in trend reversal analysis. For more details about this pin bar, you can understand it through the GICTrade explanation below. Don't forget to check the GIC Mobile Apps on the Google Play Store and the Apple App Store.
Definisi Pin Bar
This pin bar is a reversal pattern in price action that will show rejection at the price level. Starting from the abbreviation 'Pinocchio Bar' which is its shape that looks like the famous cartoon character Pinocchio, with a pattern that has a rectangular tail shape. Usually consists of a fairly small body with a fairly long axis like twice the size of the original body. For the opposite end or tail, it has a smaller axis. This candlestick is found in various TFs so that the pattern is often found in the form of bearish or bullish.
This pin bar candle is formed when there is an intense battle between bulls and bears. For a bearish pin bar, the body shows that traders have dominated the market. However, bulls will enter and direct the price to rise. But in the end, the bears won the battle in that particular session. The opposite will also apply to bullish pin bar candles. There are also valid pin bars that have tails that are longer than their bodies. A long tail indicates price rejection or fake breakout against a certain price level. The smaller the pin bar, the more valid it will be (minimum 2/3 of the total length).
Pin Bar Characteristics
There are characteristics of this type of candlestick itself, namely, the pin bar has a tail that is longer than its body. This tail is also commonly referred to as the axis or shadow. The length of the tail will indicate the strength of rejection or the occurrence of a false break at a level with a certain price. Later, the longer the tail of a pin bar, the more valid the pin bar will be. In this case, it can be interpreted as, regarding the increasing sentiment about rejection of a certain price level.The narrower or smaller the body of the pin bar, the more valid each pin bar structure will be. It can be concluded that a candlestick will be considered valid if the length of the tail is about two-thirds of the total length of the pin bar. In addition, there is another side of the tail with the nose. The shorter the nose characteristic, the more valid the pin bar will be. The higher the trading time frame, the more valid the pin bar will be. As long as it has been confirmed correctly. This is also due to the possibility of a level of error in the movement of a price (noise) at a high time frame position (usually 4 hours and above) which will be smaller compared to low time frame conditions (1 hour and below).
Pin Bar Power
There are several types of pin bars that often appear in trading. The following will be sorted from the strongest.- Time Framing. Each TF has its own technique for trading. The most optimal is on the Daily TF, and TF4 hours. This TF is needed to determine SR, the most optimal for SR is daily to weekly. This type of candlestick will be very optimal when combined with the 1 hour tf candlestick pattern. Trading with this bar will require a number of reversals as a confirmation.
- You have to know when the OP, SL, and TP times are. There are three approaches in trading with this candlestick or with other techniques, namely small probability with big profit, large probability with small profit, and large probability with big profit (in the same TF).
Pin Bar Based on Trend
This candlestick is divided into 2 types based on its trend, namely bullish reversal and bearish reversal. For the explanation, you can understand it through the following explanation.Bullish Reversal Pin Bar
In this type of bullish reversal, the sign shown by this pin bar is the reversal from downtrend to uptrend. In this event, the shadow or long shadow of this candle will be located at the bottom of the body and will show a pattern of lower price rejection which makes the lower low point not formed later.Bearish Reversal Pin Bar
In this type of bearish reversal, the indication shown is a reversal from an uptrend to a downtrend. While the long shadow in a bearish reversal will be seen at the top of the body. Where this indicates a pattern of rejection of higher prices which makes the higher high point not formed.Pin Bar Reversal Confirmation
In order for a bullish reversal to be confirmed, the length of the candlestick bar after the pin bar (body and tail) must be entirely higher than the lowest level, and the closing price must be higher than the closing price. Meanwhile, if a bearish reversal is confirmed, the length of the candlestick bar afterward must be lower than the highest bearish level, and the closing price must be lower than the closing price.Trading Strategy Using Pin Bar
After knowing the types of pin bars based on trends, this time we will discuss trading strategies using this type of candlestick. Some things you should pay attention to when analyzing candles include:- Wait for the price movement after it is formed so that you don't catch false signals.
- Make sure the candlestick is in the resistance area. This can be seen by drawing a flat line or a diagonal line.
- Once you have recognized the pattern of the candlestick that is formed, whether it is a pin bar or a hammer, you must ensure that the price that appears has penetrated the opening price of the candlestick that appeared at the beginning.
- If what you see is a candlestick from a pin bar, then you can then recognize whether the type of trend that is formed is bullish or bearish.
- Market Entry. This entry is an entry at the market price that can be considered the best at that time. You can choose a buy entry if a bullish reversal is formed, and choose a sell entry if a bearish reversal occurs.
- Stop Entry. This entry is a pending order entry in the form of a 'buy stop' when the reversal is bullish and a 'sell stop' when the reversal is bearish. The value of this pending buy stop order must be lower than the current market price. The level of a stop loss can be determined at several pip values below the lowest level (to execute a buy stop), or several pip values above the highest level (to execute a sell stop).
- Limit Entry. Which is a pending order entry in the form of a 'buy limit' when the reversal is bullish and 'sell limit' when the reversal is bearish. For the pending value of a buy limit order, it must be lower than the current market price. This stop loss level can later be determined from several pip values when below the lowest level (to make a buy limit), or several pip values when above the highest level (to make a sell limit). This limit entry is based on an assumption that usually the value of a price movement will retrace or experience a correction when it has reached a value of 50% of the previous tail length, or also equivalent to 50% of its Fibonacci Retracement level.
Tips for Determining Pin Bars
Pin bar is one of the formations in price action that is often used as a trading signal with a strong sign. However, not all candlesticks of this type have a high probability. Only a pin bar that is formed in certain circumstances can be valid enough to be used as a trading signal. Before doing the trading, it is a good idea to learn about tips for determining a pin bar that has a high probability so that later you will get a high profit. The tips are:- Focus on a pin bar that is present when the price is trending. This candlestick will later form when the market is trending and usually has a high probability value, both for bullish reversals and bearish reversals. Basically, a pin bar in a ranging (sideways) market condition also has the opportunity to be traded. But in general this rarely happens and it is easier to trade using this candlestick when the market is trending. In this case, you can look for currency pairs that are trending, while for those that are ranging or choppy, you can ignore them in the meantime. The first step to getting used to trading with this candlestick is trading when the market is trending with a daily time frame or a 4-hour time frame (H4). If you have traded on a 4-hour time frame, then you can choose the pin bar option on a trend that is in the same direction as the trend on the daily time frame.
- Focus on pin bars that form at key levels. Often times, a market condition does not always show a clear trending condition, sometimes it can move sideways or erratically. In this case, you can refer to key levels, namely key resistance levels and key support levels. And observe whether this type of candlestick is formed around that level. If in a trending condition this candlestick is formed at the support or resistance level, moving averages indicator or Bollinger Bands, then the possibility of the validity of this candlestick is quite high.
- Focus on long tail pin bars. Because the candlestick usually has a high validity value and also usually as a signal in this trading has a greater value than usual. The long tail will later show a sentiment of a large rejection at that level which makes it very likely for a false break or can also be called a failure to penetrate that level.
Difference Between Pin Bar and Hammer Candlestick
Many people still often cannot distinguish between these two candlesticks. There are differences that you can know when you see these two candlesticks. The difference is, for pin bars, the shape of a candlestick is marked by a long tail and a small body that is about 1/3 of the entire length of the candlestick and has a short nose. The longer the tail and the smaller the body, and the shorter the nose, the stronger it will be to form a reversal or reversal of an existing trend.While in the hammer candlestick type, the shape of this candlestick is marked by a long tail and also a small body that is about 1/3 of the entire length of the candlestick but does not have a nose like in the pin bar. After knowing a few things about this type of candlestick, you can also still find other information about pin bars or other candlesticks such as hammers, dojis, or other candlesticks.
You can also apply this pin bar candlestick strategy as explained above to apply it to your trading strategy. The difference between a Pin Bar and a Fake Pin Bar is determined by the recent price movement. If the long wick protrudes from a recent price, then it is a real Pin Bar. This is a 'lie' that the market may be telling you: That the move to a previously untested level has brought in a new group of buyers (or sellers in the case of a bearish Pin Bar).
If the long wick does not stand out from the previous price action; then it is not a true Pin Bar, but rather a ‘Fake Pin Bar.’ With a true pin bar leaving a long wick above the candle, traders could open a short position to take part in the momentum that created the long wick in the first place. However, this does not work out well.
In reality, trading Fake Pin Bars will require additional analysis, as the short-term price reversal signals may not be as consistent as a genuine pin bar. We can see that what makes a pin bar interesting is the fact that price has reversed enough to leave a long wick exposed below the price action (all during the pin bar candle). However, what if the long wick is not exposed beyond the recent price action? This could mean that the reversal potential of a fake pin bar could be less than that of a genuine pin bar.
But that doesn’t mean that price action traders can’t use this information to their advantage. You just need to determine which false pin bars are profitable and which ones aren’t. You can do this by looking at the trend of the currency pair, and trying to enter only in the direction of the long-term trend. Traders can even use price action analysis to qualify and analyze trends.
After price has established an uptrend by creating a series of higher highs, and higher lows, the rapid move to the downside is corrected before the candle is complete (leaving the long wick circled above). Traders can look to trade this false pin bar candle by going long after this candle forms, placing a stop slightly below the low of the false pin bar wick.
That way, if the price reverses against you (and moves down while you are in a long position), you can exit the position if a lower price is printed below the bottom of the false pin bar wick. That is the discussion from GICTrade regarding the explanation of "Pin Bar Candle: Price Action Reversal Pattern Strategy". You can also find out other information about trading, investing, and other financial trivia, such as BRI Transfer Limits and "Understanding & Types of Candlesticks You Need to Know" and "How to Read Candlesticks in Forex Most Accurately" only in Jurnal GIC. Also make sure you deepen your forex knowledge at GICTrade, via scalping ebooks, and also NFP live trading.
