Introduction:
Most of the traders have traded Pin bars at some point, or at least learned about them in past, but it is still grey area for many traders. Well It shouldn't be. Pin bars should be included in any traders system or at least some part of it as they are great trading tool. I love trading Pin bars - they are easy to spot and most importantly very profitable.
I assume that the reader has some basic understanding of Japanese candlesticks as I will not re-visit the basic definition of candlesticks. I will just show how I trade Pin bars what process I use to identify them easily. For the purpose of clarity this is the definitions I use:
Breakdown:
  • Most important of all - don't look for pin bars - pin bars are easy to spot - the will jump out of the chart like a sore thumb. If you have to think about it - “Is it a pin bar or not?” - most likely its not a pin bar.
  • Pin bars are Reversal patterns - that means there must be a trend before them - even if it is for short period of time
  • Most profitable Pin bars will be on Daily charts and weekly charts. You can trade them exclusively by them own, as so many traders will see them. On shorter time frames (bellow Daily chart) you will need to combine them with other technical analysis. Like Support/Resistance, Trend direction of Daily chart, Pivot Points, Round numbers etc.

I have a simple 5 point check list for any pin bar I trade. They are simple and very rigid rules that all must be correct in order to trade a pin bar. Rules 3-5 traders seam to forget most of the time when trading pin bars. It is very important to have a small Nose on the pin bar, but most importantly there must be a trend before each pin bar - remember Pin bars are reversal patterns without a trend You CAN`T TRADE PIN BAR. I use Bollinger bands for determining trend - If pin bar has hit Upper Bollinger band I consider that and uptrend, if Pin bar has hit Lower Bollinger band I consider that a downtrend. This is just my preference, but you can use any other method - Moving Averages, Trend Lines, CCI, or just naked eye. Remember trend doesn't have to be massive 3-6 month trend, even short few days trend is ok to trade if you have short profit targets. But BIG NO-NO is to trade pin bars in range markets or when pin bar is in the middle of the range (not sticking out)

Ok lets go to LIVE examples:

USDJPY D1:

AUDUSD D1:
GOLD D1:
EURUSD W1:
LIGHT OIL D1: Conclusion:
As you can see - Pin bars offer great trading opportunities both as entries and exits, but you must have the patients to wait for them. Pin bars often offer very good Risk:Reward Ratio, so you can afford to lose on majority of them and still make good profit.
I recommend you start trading Pin bars on D1 and W1 charts and only on major currencies pairs + Gold and Oil. This will give you 5-10 trading opportunities a month I can promise - you will make profit by the end of each month.

Best of luck.
P.s. Next month - Engulfing candles my 2nd favourite Japanese candlestick
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