Trading Pin Bars from Key Levels

We know by now that pin bars are a useful forex trading tool but give best results when used in combination with other price action cues, such as at key support and the resistance levels.

One should always take only the best pin bar trades visible at swing low or swing high or at the confluence of dynamic moving averages or other areas of support to resistance. Ensure that the pin bar looks right before you take a trading decision based on it. The task of identifying true pin bars becomes easier as you gain more understanding about the reaction of pin bars to price. Till that time avoid trading at pins that you are doubtful of them.

Some examples of good pin bar setups are:

• The point of confluence of a previous price action when the market after moving in one direction returns back to re-test an earlier support or resistance level.

• The following chart shows the movement of the USD/CAD currency pair. You can see that after a bullish trend which continued for three weeks, a perfect pin bar was formed, which was then followed by a reversal of the trend.

The accuracy of the pin bar signals increase as you combine them with the signals happening at longer term resistance or support levels. The chart below shows the formation of a pin bar at the resistance level that had been touched 2x prior and held each time. Notice how the market sold off heavily the third time around from the pin bar at the key level.

Pin bar signals have proved to be highly advantageous even when the markets are moving in a range. They are very profitable and highly accurate if the formation is clear and supported by the confirmation of support or resistance levels.

A situation where pin bars form at the top or bottom of the market consolidation phase signifies that a trend resumption is near.

While pin bars that form of a dominant daily trend are more accurate than the counter trend pin, the latter can lead to long term directional bias changes.