Pin bar candle is an expression of Japanese candlestick. Classified into two main types, bullish reversal and bearish reversal. Join Learn Forex Trading to learn how this candlestick gives traders a strong signal of price reversal in their trading strategy through the following article.
Overview of the pin bar candle model
To conveniently buy stocks at low prices and sell them at high prices. Investors need to apply many methods. Fundamental and technical analysis indicators to gauge market momentum. As well as the direction of price movements.
Technical analysis methods focus primarily on analyzing historical price data. However, they do not necessarily provide accurate predictions. Meanwhile, the pin bar candle stands out for its ability to provide accurate signals on price momentum and reversal potential. Brings important information about future price movements.
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What is the pin bar candle?
Pinocchio bar is a typical Japanese candle with one long wick and one short wick. Or even almost none, combined with a small body. Shows that at a particular point, the market was opposing the price action. It has become one of the popular candlestick patterns on Forex charts. Especially since it can form in just one candle.
Japanese candles, created by rice merchant Munehisa Homma in Japan in the 17th century, are intended to show the influence of human psychology on the market. Thanks to it, traders can look deeply into the current market sentiment. It’s important to understand what is driving prices.
Pin bar, similar to other Japanese candlesticks. Gives traders a sharp insight into market psychology. In currency trading strategies, it is a strong signal of price reversal. Indicates that the upward momentum is losing strength and the downtrend may be starting to dominate.
Meaning of pin bar candle
pin bar candle plays an important role in the technical analysis of financial markets. Especially in stock trading, foreign exchange, and other financial markets. Helps identify potential reversals in price trends.
Candlestick patterns provide an accurate summary of the confrontation between buyers and sellers over a specific time. The length of the wick, the size of the candle body, and the candle color are all important information. From there determine who prevails in this confrontation. If the buyers prevail, the price will increase and the candle color will be green. On the contrary, if the sellers prevail, the candle will decrease and turn red. During periods of tension, when one side is completely dominant, the price will follow the trend of the dominant side.
pin bar candle Depending on its position in the current price trend and other technical factors consider it a buy or sell signal. Appearing at the bottom of a downtrend, candles can indicate a reversal and a buy signal. Appearing at the top of an uptrend can be a sign of reversal and a sell signal. However, to ensure accuracy, the use of candles needs to be combined with other factors. To make trading decisions, confirm using other technical analysis methods.
Characteristics of pin bar candle
pin bar candle is an easily recognizable expression. The candle has a long wick (tail) on one side and a narrow candle body. The wick usually accounts for about 2/3 or more of the total length of the candle.
Similar to other candles, the color of the candle’s body can be white or green. Indicates that the opening price is lower than the closing price. Or if the candle is black or red, the closing price is lower than the opening price. The closing price and opening price must be close to each other. Close to each other or preferably equal. Additionally, openings and closings should be concentrated at one end or near the end of the candlestick.
In the case of the pin bar candle, it’s not perfect. There may be a small nose protruding below, or above, the body.
Common candlestick characteristics include a small body, covering part of the candle’s range. Shows uncertainty between buying and selling forces. In addition, it also has two long arrows above and below the candle body. Shows the highest and lowest prices over a while. The longer nose on one side creates a “broom” shape, indicating one side’s dominance in the market.
Types pin bar candle
A pin bar candle is divided into two main types, which are bullish reversals and bearish reversals.
pin bar candle bullish reversal
pin bar candle Bullish reversals often appear when downtrends are ending and at important support areas. It provides a strong signal that the price is about to reverse from a downtrend to an uptrend. This signal becomes even stronger if the candle is colored green.
The unique characteristics of bullish reversal candles are short bodies, very long lower wicks, and short or even absent upper wicks. The long lower wick shows that during the trading session, the sellers tried to push the price down, but the buying pressure was much stronger, which pushed the price closer to the opening price. From there, it can be inferred that the buyer has gained the advantage in this confrontation.
pin bar candle bearish reversal pattern
The bearish reversal candlestick pattern often appears at the end of an uptrend, a sign that the price is about to change from an uptrend to a downtrend. This signal becomes stronger when the candle is colored red.
The prominent features of bearish reversal candles are long upper wicks, short or almost non-existent lower wicks, and short candle bodies. The long upper candle wick shows that during the trading session, the buyers tried to push the price up, but the selling pressure “overwhelmed,” causing the price to push down and close near the opening price. From there, it can be inferred that, in this confrontation, the seller has gained the advantage.
In what fields does a pin bar candle form?
During the opening phase, buyers quickly prevailed and pushed prices up strongly. When the price reaches the top of the wick, sellers can enter the market with a strong enough supply to maintain the price high. At the same time, they not only set resistance levels but can also completely control the price, leading to a market reversal.
Seller dominance increased, creating strong pressure on prices and resulting in prices falling below the opening level during the opening period, explaining why the candle has a very long wick. This action further makes it clear that they are controlling the entire market.
In a bearish market, a pin bar candle appears between the bullish candle (first candle) and the bearish candle (last candle). In the opposite case, when the market is bullish, the candle will be between a bearish candle (first candle) and a bullish candle (third candle).
How to trade effectively with pin bars
If you get used to recognizing pin bar candle and applying it in favorable market conditions, this can open up significant profit opportunities for you in trading.
Trade with simple pin bars
The appearance of a pin bar candle signals that the market is experiencing pressure. Can reverse at any time. Therefore, in case of a downtrend, a bullish pin bar may appear. Conversely, a bearish pin bar will be present after an uptrend.
The transaction process can be carried out as follows. First, measure the entire pin bar length from the lowest point to the highest point. When the price crosses the lowest point, you can open a sell order. Place a stop loss order at the highest point of the bearish pin bar. To determine the take profit point, you can use the length of the pin bar and measure from the minimum sell point downwards. Equivalent to twice the length of the candle.
For bullish pin bars, you can open a buy order at the closing price of the pin bar candle. Place a stop loss order at the nearest bottom and determine the take profit point with an R: R ratio of 1:2 or 1:3.
In the case of a bearish pin bar, you can open a sell order at the closing price of the candle. Place a stop loss order at the nearest peak and take profit with the R: R ratio still being 1:2 or 1:3.
Trade pin bars with other technical tools
It does not always lead to a reversal when a pin bar candle appears. Therefore, during trading, pin bars appearing in technical confluence areas, or technical indicator convergence areas, often bring more reliability. Technical tools such as Pivot points, MA lines, Fibonacci,… can indicate a specific price level that can cause a strong reversal.
Using support and resistance lines can help identify trends on the chart. You can draw a trendline by connecting a peak to a peak or a trough to a trough and then extending the line to the right. Trend lines can act as dynamic resistance or support lines. When the candle appears and the price touches the resistance line in an uptrend, it can be a sign that the price will increase, and the trader can consider buying. Conversely, if the price touches the support line during a downtrend, the price may continue to decline, and traders may consider a sell order.
When combining indicators, observing the main trend and the location of the candles is important. Reversal signals can appear when there is a divergence of the RSI line, the MACD line crosses the signal line, or the PSAR indicators move. Combined with Fibo retracement, using the 50% and 61.8% marks from Fibo retracement helps determine a reasonable stop loss point when<strong> pin bar candle completed.
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Combine the trading price model with the pin bar
The trader observes where the pin bar candle appears and checks to see if there is a price pattern ending there. If candlesticks appear at the ending points of a price pattern, traders can predict further price actions.
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What should you keep in mind when trading with pin bars?
Although the pin bar trading method seems simple. Its effectiveness is only shown when the user applies it correctly. This requires commitment and time to grasp and learn thoroughly. As well as learn valuable lessons during use.
Some common mistakes include using the wrong chart area or price. Some people think that the pin bar reversal strategy can be applied in the same way as the pin bar continuation strategy, which often leads to failure.
For the pin bar candle, the larger the tail length, the stronger the trend reversal. Traders can use it to accurately identify the bottom and top of a trend.
Epilogue
Pin bar trading is considered one of the most reliable means of analyzing price action in the market you are participating. Pin bar candle, with its reliability and solidity. Acts as a powerful tool in every trader’s “arsenal”. Hopefully, the information provided by Learn Forex Trading will bring value and effective support to your trading process. Wishing investors great success!
Questions related to pin bar candle
Pin bar trading method?
The pin bar trading method is a reliable means of analyzing prices in the market. With pin bar candle is considered a powerful tool in the trader’s “arsenal”.
What are some common mistakes when using the pin bar trading method?
Some common mistakes include using the wrong chart area or price. Misunderstanding between reverse pin bar and positive pin bar strategies, leading to unsuccessful results
What are the important characteristics of the pin bar candle according to the above content?
Important characteristics of the pin bar candle include a small body and a long tail. Related to the price reversal trend in the market.
