How to trade with the best pin bar pattern indicator?
The pin bar pattern is one of the most commonly used candlestick pattern indicators. It is valuable as it can signal a potential reversal in the direction of price action.
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What makes it one of the trader’s favorite candlestick pattern indicator is that it is easy to recognize visually. While there are many different types of candlestick patterns, the pin bar pattern is easy to recognize.
Many traders make the mistake of using the pin bar candlestick pattern in isolation. Unlike single candlestick patterns such as the doji, the pin bar candlestick pattern is a three-session candlestick pattern.
This means that traders should pay attention to the previous session’s candlestick, the current session where the pin bar is likely to form and the following candlestick pattern.
A successful pin bar candlestick pattern can only be formed when you understand how the previous and the following candlestick patterns close. For beginners, as a result, trading the pin bar pattern can be a bit daunting at first.
The pattern is powerful, but it takes a bit of work.
To make it easy, we introduce the best pin bar pattern indicator that you can apply to your MT4 trading platform. Using this indicator, you can easily identify the pin bar patterns and trade based off the alerts.
However, we should note that trading the pin bar pattern indicator in isolation can be risky. Therefore, you must always compliment the pin bar pattern with an existing trading strategy or use the market context available.
In the next section of this article, we deconstruct the pin bar candlestick pattern and explain the meaning behind this candlestick pattern.
What is the meaning behind the pin bar candlestick?
The pin bar candlestick pattern is really distinct compared to the many other types of candlestick patterns. Some might argue that the pin bar pattern is similar to that of the hammer or the inverse hammer candlestick pattern.
This might be true. The name pin bar comes due to the fact that it resembles that of a pin bar, a small body with a long wick or a shadow.
While many traders focus more on the pin bar and prepare for the impending price action, it is important to understand the basic fundamentals of the pin bar formations.
Firstly, the pin bar candlestick pattern can form anywhere in a price chart. However, trading the pin bar in isolation is not the way to go. Just like anything else in the financial markets, you need to look at the pin bar formation with the market context.
A pin bar basically represents a battle between the buyers and the sellers, with one of the two eventually gaining ground.
As a result, the pin bar is formed with a small body and long upper or lower wicks or shadows.
The bullish pin bar is formed because of rejection of prices at the highs. Likewise, a bearish pin bar is formed due to the rejection of prices at the lows. At the close, either the buyers or the sellers dominate the sessions.
Pin bars are very distinct due to their long wicks. Therefore, you will often see pin bars forming as it tends to trap weak positions near the highs and the lows. Some traders call this stop hunting.
Regardless, a pin bar is the result of the market sentiment between the buyers and the sellers which leads to this unique candlestick pattern. One of the benefits of trading with the pin bar is that it can happen across any time frame. Therefore, traders can find opportunities to trade the pin bar in any time frame of their choice.
Of course, the pin bar formation on the higher time frames is more valid compared to the pin bars that are formed on the lower time frame. The risk and reward set up also varies which is something that traders need to bear in mind.
The pin bars are formed near the end of a rally or during the end of a correction. Therefore, you will often see that price makes one last push before closing with a pin bar candlestick pattern.
Many traders think that trading just with the pin bar is more than enough. This is not true. You need to identify the pattern alongside your trading strategy and seek validation from other aspects of your trading system as well.
As is the norm with most candlestick patterns, the market context plays a major role and this is something to bear in mind. The pin bar pattern does how signal an important shift in the markets. Therefore, it is ideal if you use these pattern alongside other means to validate the markets.
Types of pin bars
As you might already know, there are two types of pin bar patterns that are formed.
The pin bar pattern is essential in its formation. Typically, once the pin bar is formed, you can expect price to reverse and post strong gains quite immediately. This happens as the pattern traps the weak positions and reverses course.
This set up leads to the weak positions being closed out, this adding to the momentum in the direction in which price is moving.
What is a bullish pin bar?
The bullish pin bar forms near the end of a correction in an uptrend or near the end of the downtrend. The pattern is formed near the bottom and you can see often that the pin bar tends to trip the stops near the end before price reverses course.
The bullish pin bar is identified by long lower wick the body (the open and close) being bullish. When the bullish pin bar is formed at the lows in the trend, you can expect to see a reversal in price action.
The chart below gives examples of a bullish pin bar on a price chart.
Bullish Pin bar example
What is a bearish pin bar?
The bearish pin bar is formed at the top end of a rally, or after the end of a correction to the downtrend. The bearish pin bar is identified by long upper wicks and a bearish close. This pattern indicates that price rises to a new high but is rejected leading to a bearish close by the end.
The identification of the bearish pin bar near a key price level such as a resistance level could be indicative that price could action be reversing course.
The next chart below shows the bearish pin bar example on a price chart.
Bearish pin bar example
The best pin bar pattern indicator
While it might seem easy to understand, trading with the pin bars means that traders need to keep an eye out on the markets of the choice at all times. If you are looking to trade the pin bar patterns on lower time frames, then it means that you need to constantly scan all the markets you are trading.
To make it easy, you can make use of the pin bar pattern indicator. The pin bar pattern indicator presented in this article is one of the best pin bar pattern indicators that you can find for the MT4 trading platform.
By simply using this MT4 pin bar pattern indicator you can easily let the indicator do the work for you while you only wait to be alerted for the signals to crop up.
Once you download the indicator you can install it onto your MT4 trading platform and then drag/drop the indicator onto the chart of your choice. The pin bar pattern indicator is very easy to use and there is nothing to configure when you install it onto your charts.
Once the best pin bar indicator gets to work, it will plot the arrows on the pin bars on the price chart. A bullish pin bar is represented by an upward arrow and a bearish pin bar is represented by a downward arrow.
The next chart below shows how the best pin bar pattern indicator plots these arrows on the charts.
Pin bar pattern indicator MT4
As you can see from the above chart, the pin bar pattern indicator plots the bullish and the bearish pin bars on the chart time frame of your choice. But as you might have noticed, the pin bar pattern indicator plots a lot of pin bars.
We initially mentioned that the pin bar pattern must be traded with the general market context and not in isolation. A quick analysis of the above charts shows a few losing trades if you had taken, trading only based on the pin bar pattern formation.
Therefore, it is ideal that you use this MT4 pin bar pattern indicator within your existing system.
If you are short of ideas on how to trade with the pin bar pattern indicator for MT4, here are a few.
How to trade with the pin bar pattern indicator MT4?
To keep it simple, let’s look at examples of using the Fibonacci levels. We know that price tends to retrace up to 38.2% or sometimes to 61.8%. These are key levels in a correction to a trend.
Therefore, watch for pin bar pattern formations near these Fibonaci level.
In the next chart below, we plot the Fibonacci retracement levels.
Using pin bar pattern indicator with Fibonacci levels
In the above chart, you can see how price initially rallies and then drops, leading to a retracement. Near the 38.2% Fibonacci level, you can see that a pin bar pattern was formed as signaled by the MT4 pin bar pattern indicator.
Following this retracement, price then begins to move to the upside and resumes the uptrend.
Another way to trade with the pin bar patterns is to use it in the context of divergence. Divergence, as you might know is a leading indicator. It can signal potential corrections or retracements to the trends.
Because the pin bar pattern itself represents a rejection of a price level, you can expect the combination of divergence and the pin bar pattern to be very effective.
The next chart below shows how to use the pin bar pattern indicator with divergence.
Pin bar pattern indicator with divergence
In the above example, you can see a hidden bearish divergence. The hidden bearish divergence is formed as price makes a higher low, but the Stochastics oscillator which represents momentum plots a lower low.
If you were to trade this divergence in isolation, there is no way of telling if price will reverse of whether there will be a good opportunity to trade. You will notice that the pin bar pattern indicator plots an up arrow.
Just a few sessions after this, price starts to post the higher low and then begins to reverse course. Trading this divergence set up by combining pin bar patterns can be a great way to capture high probability trades.
The pin bar pattern indicator – Conclusion
As outlined in this article, the pin bar pattern is a unique candlestick pattern that is formed in the markets near key price levels. While the pattern forms regularly, it gains more significance when it is formed near an important price level such as a support or a resistance level.
When the pattern forms, you can expect prices to reverse course, thus giving you the opportunity to make good profits from this pattern alone. However, it is important to note that trading just with the pin bar pattern is not recommended.
You need to build the market context to truly understand what is going on. Therefore, the pin bar pattern indicator for MT4 is one of the best available indicators that you can use free of cost.
The benefits of using the best pin bar pattern indicator is that it can enhance your existing trading strategy. Regardless of whether you are trading with the trend or a counter trend trader, the pin bar pattern can be a valuable tool in your trading toolkit.
The indicator is available for download free of cost and you can immediately install the indicator onto your charts and trade with your existing system. The pin bar pattern indicator works on the timeframe on which it is installed, thus it can fully integrate onto your existing trading system or method.
Because the indicator is simple to use, there are no additional configurations required. You can expect your profits to be more consistent when you combine the pin bar pattern indicator with your trading system.
You don’t have to keep looking for various candlestick patterns that form near the support and resistance levels. Just this one indicator and focusing on the pin bar pattern indicator can be a great way to raise the consistency of your trading system.
Table of Contents
- How to trade with the best pin bar pattern indicator?
- What is the meaning behind the pin bar candlestick?
- Types of pin bars
- What is a bullish pin bar?
- What is a bearish pin bar?
- The best pin bar pattern indicator
- How to trade with the pin bar pattern indicator MT4?
- The pin bar pattern indicator – Conclusion