bars tail points down because it shows rejection of lower prices or a level of support. As you already know, in Forex trading nothing is 100 certain. We can see in the daily chart of EUR/JPY below two very well formed counter-trend pin bars that formed off support in a range bound market that netted some serious gains for traders with a keen eye for price action analysis. The pin bar formation is a price action reversal pattern that shows that a certain level or price point in the market was rejected. Along with this, I typically like to use a fixed Take Profit target.5:1 or 2:1 reward to risk ratio to scale out of inside bars trades. Trading the Inside Bar Candlestick Pattern. The following daily chart of GBP/JPY shows that pin bars taken with the dominant trend can be very accurate.
Thus, there was a high probability of a move lower after that pin bar. Often Inside Bar trades can lead to a prolonged impulse move after the breakout, so employing a trailing stop after price has moved in your favor is a smart trade management strategy. The pin bar formation is a reversal setup, and we have a few different entry possibilities for it: At market entry This means you place a market order which gets filled immediately after you place it, at the best market price. When we short the EUR/USD, we would want to place a stop loss order above the upper level of the inside range. Pin bars of this clarity and magnitude can be entered after the close on a market order. The daily GBP/JPY chart below demonstrates how a large, well formed pin bar can tip off traders to longer-term changes in trend direction. When you spot a breakout through one of these two levels, then that would give you a signal in the direction of the breakout.
These are the two black lines on the chart. In Summary The pin bar formation is a very valuable tool in your arsenal of Forex price action trading strategies. In simple terms, if the price action interrupts the range upwards, then you should go long. As you see, after the bearish inside day breakout the price initiates a sharp decline, which could have been traded for a decent profit. This pattern was originally popularized by Toby Crabel in his book entitled: Day Trading with Short Term Price Patterns Opening Range Breakout. Aggressive breakout traders would consider buying when the price reaches a few pips above the inside candle high. The open and close of the pin bar should be very close together or equal (same price the closer the better.
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