This section explains what the Pin Bar is. Following sections explain how it may be traded. Generally examples are only given for pin bars pointing one way. The same concepts can be applied to pin bars pointing the other way (just reverse the concepts!).
Trading is a probabilities game. There is always risk of loss and the trade going ‘the wrong way’ after the pin bar has formed. All we can expect to do is to tip the odds in our favour. When good pin bars are traded then a trader can tip the odds in their favour. Some trades will result in losses; such losses will occur with any trader from time to time. (Even a good pin bar setup may result in a loss!)
Pinocchio bar (which is abbreviated to ‘pin bar’) is poking his long nose outwards andis telling you a lie (an untruth) about where the price is going. The name is based onthe old European story about the wooden boy, Pinocchio, whose nose grew longerevery time he told a lie. The bigger the lie the bigger the nose! For us this means thatwe want a nice long nose when we see a pin bar. We trade in the opposite direction towhere the nose is pointing (so the pin bar in Figure 1 indicates that traders should betaking short positions while trading EURUSD). The high of the bars on either side ofthe pin are the ‘eyes’ for the pin bar. Note that the open and close of the pin must bewithin the left eye.
For a nose pointing up, this means that if the high of the eye isroughly at the 1.2175 level (as shown in Figure 1), then the open and close of the pinbar must be below this level of 1.2175 (as is the case here). If the open/close isoutside of this level then it is not a real pin bar (see the Advanced Tutorial for someideas on how a trader might deal with a bar that looks like a pin bar but fails to meetthis requirement).
The pin bar means that the price is going to move in the opposite direction to wherethe nose is pointing. In Figure 1 the nose is pointing up so the trader should expectprices to move down.
A pin bar must:
• have open/close within the first eye,
• protrude from surrounding prices (‘stick out’ from surrounding prices); it cannot be an inside bar.
A good pin bar has:
• a long nose (and a long nose relative to the open/close/low),
• a nose protruding a long way from the prices around it (it ‘sticks out’),
• the open / close both near one end of the bar.
The pin-bars can be played by themselves as they occur on the charts. Oneforexfactory.com member did some automated back testing and found that merelyplaying a pin bar does not provide spectacular results. You need to carefully select thepin bars you want to play. The best pin bars are played as they bounce off either:
For the BEST results a trader may play a pin-bar on the swing high (or swing low) ora pin-bar that is bouncing off confluence (of MA and Fib levels). The pin bar is a veryreliable setup under these circumstances, indicating that there is a high probabilitythat prices will change direction – which is very tradeable setup!Shown is a cluster of Fibonacci retracement levels from the big moves down during2005. Note that the pin bar is bouncing right off these. This means that the pin bar hasbounced off an area of confluence!Shown in Figure 2 is a close-up of the pin bar that formed on the EURUSD pairweekly chart. Notice that there is confluence of fib retracement levels from the morerecent previous movements down. This pin bar has punched through these, after threeprevious bars were bouncing off this area. This would have been a good pin bar tocatch. The three previous bars failed to move through this area, showing it hassignificant resistance. The pin bar has moved a long way through it before movingright back. The high made by the pin bar is probably the highest price thatwill reached for weeks (or months).
Is this a good pin bar formation? The nose of the pin bar pokes out a long way above previous prices. It has made it through some resistance at the confluence of fib levelsand bounced off the longer-term fib levels (in Figure 2). The open and close are belowthe high of the previous bar (the eye). Yes – this is a good pin bar.
Trading is a probabilities game. There is always risk of loss and the trade going ‘the wrong way’ after the pin bar has formed. All we can expect to do is to tip the odds in our favour. When good pin bars are traded then a trader can tip the odds in their favour. Some trades will result in losses; such losses will occur with any trader from time to time. (Even a good pin bar setup may result in a loss!)
Pinocchio bar (which is abbreviated to ‘pin bar’) is poking his long nose outwards andis telling you a lie (an untruth) about where the price is going. The name is based onthe old European story about the wooden boy, Pinocchio, whose nose grew longerevery time he told a lie. The bigger the lie the bigger the nose! For us this means thatwe want a nice long nose when we see a pin bar. We trade in the opposite direction towhere the nose is pointing (so the pin bar in Figure 1 indicates that traders should betaking short positions while trading EURUSD). The high of the bars on either side ofthe pin are the ‘eyes’ for the pin bar. Note that the open and close of the pin must bewithin the left eye.
For a nose pointing up, this means that if the high of the eye isroughly at the 1.2175 level (as shown in Figure 1), then the open and close of the pinbar must be below this level of 1.2175 (as is the case here). If the open/close isoutside of this level then it is not a real pin bar (see the Advanced Tutorial for someideas on how a trader might deal with a bar that looks like a pin bar but fails to meetthis requirement).
The pin bar means that the price is going to move in the opposite direction to wherethe nose is pointing. In Figure 1 the nose is pointing up so the trader should expectprices to move down.
A pin bar must:
• have open/close within the first eye,
• protrude from surrounding prices (‘stick out’ from surrounding prices); it cannot be an inside bar.
A good pin bar has:
• a long nose (and a long nose relative to the open/close/low),
• a nose protruding a long way from the prices around it (it ‘sticks out’),
• the open / close both near one end of the bar.
The pin-bars can be played by themselves as they occur on the charts. Oneforexfactory.com member did some automated back testing and found that merelyplaying a pin bar does not provide spectacular results. You need to carefully select thepin bars you want to play. The best pin bars are played as they bounce off either:
For the BEST results a trader may play a pin-bar on the swing high (or swing low) ora pin-bar that is bouncing off confluence (of MA and Fib levels). The pin bar is a veryreliable setup under these circumstances, indicating that there is a high probabilitythat prices will change direction – which is very tradeable setup!Shown is a cluster of Fibonacci retracement levels from the big moves down during2005. Note that the pin bar is bouncing right off these. This means that the pin bar hasbounced off an area of confluence!Shown in Figure 2 is a close-up of the pin bar that formed on the EURUSD pairweekly chart. Notice that there is confluence of fib retracement levels from the morerecent previous movements down. This pin bar has punched through these, after threeprevious bars were bouncing off this area. This would have been a good pin bar tocatch. The three previous bars failed to move through this area, showing it hassignificant resistance. The pin bar has moved a long way through it before movingright back. The high made by the pin bar is probably the highest price thatwill reached for weeks (or months).
Is this a good pin bar formation? The nose of the pin bar pokes out a long way above previous prices. It has made it through some resistance at the confluence of fib levelsand bounced off the longer-term fib levels (in Figure 2). The open and close are belowthe high of the previous bar (the eye). Yes – this is a good pin bar.
No comments:
Post a Comment