How to trade the Pin Bar Trade Set up

By | April 14, 2016

Technical analysis includes a broad array of technical indicators and ways to analyze price history, but one of the best kept secrets of technical analysis is a rather simple, but extremely powerful price action signal called the pin bar.  The pin bar was first coined by Martin Pring, a famous technician in his own right.  In the mid-2000’s, Pring wrote an excellent book entitled, Pring on Price Patterns, and in it Pring discusses the pin bar.

The pin bar formation is a price action reversal pattern that shows that a certain level or price point in the market was rejected.

The Pin Bar

Before we delve into discussion on how to trade a pin bar, let’s take a look at one:

Basically, you can see the pin bar is a candlestick that has a long extended wick to one side with a very small body.  Pring named his candlestick pattern a pin bar after the Disney character, Pinnochio.  Pring noticed that these pin bars oftentimes formed at the tops and bottoms of moves and they tended to signify strong trend exhaustion and possible trend reversals.  Pring felt like the long upside wick was akin to Pinnochio’s nose growing when he lied.  The pin bar’s nose grows long as the candlestick lies to the market, pretending as though price is moving higher, when in reality there has been a complete reversal in price action during the period the pin bar was open.

Not All Pin Bars Are Created Equal

  • Pins must form at the top and bottoms of an extended move; when they form in the middle of consolidation, they are not nearly as reliable.
  • Pins must have a small head and long wick.  If the head is too big it is not a pin bar.  There should be a very clear difference in the length of the wick and the length of the body.

Location, Location, Location

The location of the pin bar is essential.  Ideally they should be in line with the overall currency trading trend, and they should form at areas of strong support/resistance.

Pin Bar Must have the below 3 conditions

  1. Open and Close within previous candle
  2. Candle Wick Minimum 2 time length of candle body
  3. Should be formed after an extended uptrend or downtrend

 

Entry & Exit

Entry is always on break of nose, and stop is always just beyond tip of the wick.

Live Market Examples

STAR Bullish PIN BAR

STAR

Reliance Bearish PIN BAR

RIL

7 thoughts on “How to trade the Pin Bar Trade Set up

  1. Bramesh Post author

    I use on higher time frame as noise is less

  2. RAJMOHAN

    IS IT RELIABLE ON ONLY DAILY TIME FRAME?
    I AM CHECKING ON LAST 6 MONTHS NIFTY

    THANKS FOR ANOTHER CREDIT IN KNOWLEDGE BANK

  3. Dee

    It’s the nose which differentiates between Pin Bar and Inverted Hammer pattern.

  4. Divyesh Soni

    Sir, I’m holding 360 put of GAIL@6 cmp is 6. And 440cal of axis bank@ 12 cmp is 11

    Wats ur view on both Ma holding till nxt week !!

    Pls guide me !

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