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Pinbar Trading Strategy
You’ve probably come across a pin bar trading strategy that goes something like this…
You wait for the pin bar to form, then you get long.
Put your stop loss below the low of the pin bar, and aim for a minimum of 1:2 risk to reward.
When the price comes into an area of support, it starts trading higher immediately without giving you a pin bar
setup.
You miss the move because there wasn't a pin bar to start with!
I will share with you what a pin bar really means, and how you can actually identify trading opportunities in the
market without waiting for a pin bar.
Instead, I like to understand what the pattern is telling me, what the market is telling me!
In the example, what you have is that price opens, the bulls came in and took charge and pushed price higher.
And later the bears came in and say, "Uh-uh, that's as high as you're going to go my friend."
And they push price all the way back lower, closing at the lows.
So what you have over here at this wick is simply price rejection!
And for the bullish pin bar, again, is just the same principle, but on the opposite end of the spectrum.
Price opens, the bears came in and took charge, pushed price lower.
And then the bulls came in and say, "No, no, no, my friend, that's as far as you're going to go."
The thing I see with most traders is that they say, "Oh, I see a bearish pin bar. I'm going short, place my stop loss
above the high, and the price is going down."
You can see on this chart over here, this 4-hour chart of the USD/CAD.
So, what a trader will do is they'll go short, and place their stop loss above the high!
But the thing with this approach is that you are not looking at the big picture of the market.
You realize that you are actually going against the trend as well!
This is the same chart, USD/CAD, but the only difference is that it's on the 15-minute timeframe.
This green box over here is basically the same bearish pin bar you saw earlier.
But if you were to take this trade, can you see what you are actually doing?
You're actually going short into an area of support on this lower timeframe:
You are against the higher timeframe trend, and you're also against the lower timeframe trend.
You are basically a counter-trend trader on the higher timeframe and the lower timeframe!
So, what are the odds of this trade actually working out?
Another example:
You can see over here this chart is the CAD/JPY daily chart.
Possibly maybe placing a buy stop order above the high of the pin bar.
As you can see, you're against the trend on the daily chart.
You can see the same pin bar we saw earlier is basically this green area!
Price opened, get rejected and nally closed almost at the same level.
But if you look at this chart, does this look bullish to you?
Again, you're against the higher timeframe, and you're against the lower timeframe.
And this is de nitely something that I call a very low probability trade!
Well, what I would encourage you to do is to trade with the trend on the higher time frame.
Because for most pin bar or engul ng patterns that you actually see on your charts, on the lower timeframe, they are
usually a retracement on the lower timeframe.
But what you can do to improve your odds is to trade with the trend on the higher time frame!
This will greatly increase the odds of this pin bar and engul ng patterns to work out.
You have the trend with you, and you are trading in an area of support where potentially there are buyers who will
come in and push the price higher!
Another example:
Resistance in a downtrend.
Then you have this pin bar over here, or maybe an engul ng pattern, whatever you call it.
Again, can you see the difference between this pattern and the previous example I shared with you.
Where you are just going long just because it's green, and going short just because it's red.
Now you may think, "Oh, wow, Satish, this is exciting stuff. Oh, so I just look for this kind of patterns in the market."
It's possibly a failed trade because price trade higher before coming down lower once again!
Nothing is...
You can nd something that gives you positive expectancy in the long run, then all you need to do is to manage your
risk, and execute your trades consistently!
You want to trade it in the context of the big picture or the trend.
This will greatly increase the odds of your trade working out.
But this solution does not come without its own, what I call, drawbacks.
Because a lot of the times I see traders just focusing on these pin bars.
They look for pin bars in an uptrend and support area, like what I just shared with you.
If you only focus or try to memorize these kinds of patterns in the market, it's not wrong!
But what's going to happen is that you're going to miss a lot of trading opportunities.
Because right now I just shared with you, "Okay, Satish, I know."
I wait for a pin bar to form, I go long and expect higher prices.
But if you're just solely waiting for this kind of pin bar patterns.
I shared with you earlier that a pin bar is just a form of price rejection!
And you come to an area of resistance, you wait for that pin bar, waiting for the bearish pin bar, waiting for it to
happen.
But it didn't!
And then you just say, "Oh, okay, I don't have a bearish pin bar. Okay, let's move on. There's no trade down here."
There is!
Look at this:
You can see over here, price rallied up higher, then it closed lower with a wick showing some buying pressure.
And the third candle price closed lower all the way down.
You can see that the three candles are telling you that there is a rejection of higher prices!
Instead of just memorizing certain patterns in the market, and wait for it to unfold.
You're just sitting on your hands all the time, with not much trading opportunities.
It's an uptrend.
Price then came into this area, this bearish bar comes in.
And then the next bar you have a gap lower, and then it closed higher!
Again!
If you are taking pin bar and engul ng set-ups, then these are trades that you should be taking as well!
And this is another way of showing you price rejection on your charts.
You can see over here the last few examples I shared with you...
Because if you were to focus only on these two patterns, you would have very little trades.
So my point is this…
But you have to understand what these patterns are telling you.
Instead, look at the structure of the market as a whole, and then spot areas of price rejection.
Recap
o increase the odds of your pin bar pattern working out, I will prefer that you
T
trade in the direction of the trend.
Know that you're not trading pin bar. You're actually trading price rejection.
Sometime price rejection will not come in the form of a pin bar.
The pin bar and engul ng pattern represent price rejection.
So, think about this...
I hope this video is actually something that lets you think about how your trading is like, and how whether you can
actually improve on it.
Especially those who are actually trading pin bar and engul ng pattern. Okay?
If you have any questions, any comments, don't hesitate to let me know. With that, I wish you good luck and good
trading.