Trading pin bars in forex is considered one of the most successful strategies among traders. In this article, we are going to highlight ins & outs of pin bar trading. Pin bars are basically of two types, the bullish pin bar and bearish pin bar as shown in the following diagram.
It is pertinent to mention here that a bullish pin bar will be valid only if it emerges in case of bearish trend while a bearish pin bar will be valid if it emerges within a bullish trend. The tail of the pin bar must be at least two times of its body. Furthermore, the nose or wick of the pin bar should not be more than one third of its body.
Now the question is how to trade a pin bar? The pin bars must be traded once they have been closed on any timeframe. The ideal timeframes for pin bar trading are four-hour, daily and weekly. It is always best to trade pin bars in conjunction with other price action strategies such as Fibonacci levels, trendlines as well as swing analysis. The reliability of a pin bar is much higher if it emerges near some critical support or horizontal level.
While trading a qualified pin bar, the stop loss must be placed at the swing low of the pin bar while the take profit should ensure at least 1:1.5 or higher return. Pin bars appeared on lower timeframes usually require small stop loss limits and vice versa.
In conclusion, it is recommended to trade pin bars on higher timeframes ideally on daily & weekly with tight money management. Only counter-trend pin bars generate reversal signals therefore avoid trading pin bars that are emerged within the same trend.