How to Make Money Trading the Pin Bar Trading Strategy.

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What is the Pin Bar Trading Strategy?

A pin bar is a candlestick with a small body and a long upper or lower wick.

Some pin bars occur along uptrends or downtrends to signify the continuation of such trends.

Others occur at the end of uptrends or downtrends to signify the reversal of such trends.

There are bullish and bearish pin bars.

A bullish pin bar has a small body, long lower wick, and little or no upper wick.

A bearish pin bar, on the other hand, has a small body, long upper wick, and little or no lower wick.

A bullish pin bar shows an upward price rejection.

It may occur along an uptrend to signify the continuation of the trend.

The pin bar may also occur at the end of a downtrend to signify the reversal of the trend to an uptrend.

It can also occur at the lower limit of a range to signal a price reversal upwards.

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A bearish pin bar shows a downward price rejection.

It may occur along a downtrend to signify the continuation of the trend.

The pin bar may also occur at the end of an uptrend to signify the reversal of the trend to a downtrend.

It can also occur at the upper limit of a range to signal a price reversal downwards.

The pin bar trading strategy is any trading strategy which banks on the pin bar candlestick to generate trade set-ups and signals.

In this post, I will teach you how to make money trading the strategy.

Pinbar trading strategy in Olymp Trade

Trading the Pin Bar Trading Strategy.

A strategy, however good it seems, if it won’t make you money, belongs to the bin.

That is not so with the pin bar trading strategy.

You don’t believe that?

Let me show you how it can make you money.

Here we go:

  1. Establish the Initial Market Trend.

The pin bar strategy works with trends – uptrends or downtrends.

Each kind of trend has the kind of pin bars you expect to see.

Therefore, the trend is the first prerequisite to the success of the strategy.

A market with upward momentum shows higher highs and lows, which means that it is an uptrend.

On the flip side, a market with a downward momentum, posts lower highs, and lows.

A market on a sideways trend is also useful here because you can utilize the upper and lower limits of the range to trade and earn.

From our introduction, you know the kind of pin bar to expect on each trend type.

Which leads us to the next step.

  1. Identify the Pin Bar.

You must now spot the pin bar because it is the real deal here, the reason we are having this strategy.

So the type of pin bar you expect depends on the kind of trend you established in step one.

What types of pin bars do you expect on an uptrend?

A bullish pin bar rejected upwards along the trend and a bearish pin bar rejected downwards towards Uptrend Pinbarsthe end of the trend.

Bullish PinbarsYou expect a bearish pin bar rejected downwards along a downtrend and a bullish pin bar rejected upwards towards the end of the trend.

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For a sideways trend, you need to draw the ranges within which the price moves.

You then expect a bearish pin bar rejected downwards at the upper limit and a bullish pin bar rejected upwards at the lower limit of the range.

Identify any of the pin bars in relation to the trend the market is in.

You can then proceed to the next step once this is done.

  1. Confirm the Signal.

Whatever kind of pin bar you identified, confirm it before entry.

You must be sure that the bullish pin bar you identified will lead to successful buy trades and vice versa for a bearish pin bar.

This is the test to carry:

  • A bullish pin bar along an uptrend must be preceded by strong price momentum. There must also not be any resistance level close to where it occurs.
  • A bearish pin bar at the end of an uptrend must be preceded by weak price momentum. It is strongly bearish if it coincides with a resistance level and sticks out of the previous swing high.
  • Bearish pin bar along a downtrend must be preceded by strong momentum. There must also not be any support close to where it forms.
  • A bullish pin bar at the end of a downtrend must be preceded by weak price momentum. It is strongly bullish if it coincides with a support level and sticks out of the previous swing low.
  • Bearish pin bar at the upper limit and a bullish pin bar at the lower limit of a price range are self-confirmatory. They coincide with resistance and support levels respectively and are even strong signals if they stick out of previous price action.

Also Read: – HOW TO TRADE FOREX, MAKE MONEY AND STILL KEEP YOUR FULL-TIME JOB.

  1. Enter Buy or Sell Positions.

If the pin bar you identify passes the confirmatory test, enter buy or sell positions as follows:

  • Bullish pin bar along an uptrend – Buy.
  • Bearish pin bar at the end of an uptrend – Sell.
  • Bearish pin bar along a downtrend – Sell.
  • Bullish pin bar at the end of a downtrend – Buy.
  • Bearish pin bar at the upper limit of the price range – Sell.
  • Bullish pin bar at the lower limit of the price range – Buy.
  1. Adjust Your Stop Loss.

For buy positions, all Stop Loss orders must be just below the low of the pin bar.

Sell positions should have their Stop Loss orders just above the high of the pin bar.

  1. Adjust Your Take Profit.

Take profit for the continuation of uptrends or downtrends should be at the closest price reversal points such as support or resistance levels.

You can alternatively choose to use a Trailing Stop Loss.

For trend reversals, Take Profit should be in line with the closest swing low for sell and closest swing high for buy trades.

Take profits for ranging markets should be at the upper limit for buy and at the lower limit of the range for sell orders.


*Risk warning:

The information provided does not constitute a recommendation to carry out transactions. When using this information, you are solely responsible for your decisions and assume all risks associated with the financial result of such transactions.
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Kenn Omollo is an investment writer and a business management consultant at Joon Online Limited. Reach him at - kenn@joon.co.ke

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