Introduced by Martin Pring, Pin bar strategy for Forex offers an excellent way of understanding and practicing the mechanics of Forex trade. In his assertion, the trading patterns are modeled based on a specific pattern of appearance. This is compared to a candlestick with the strategy being highly applicable on major pairs and longer timeframes. The use of 1H, 4H or daily Forex charts is advised as this helps you identify the prevailing patterns before making your move within the Forex trading framework
When to enter trade under pin bar strategy
Under Forex pin bar strategy, a trader can enter trade early or wait for the breaking of the pin bar. Early entry to trade gets you better prices. However, there are only minimal chances of the trade working out. In this case, the entry times in the pin bar strategy are mainly either at the close of the pin or waiting for the pin bar to be retraced. In the case of making an early entry, the risk of losses is high. Consequently, the returns attached to the debut entry are also commensurately high. With the possibility of your entry coinciding with the retracement being low, the only other reliable entry is at a later date at time on retracement. However, this comes with a considerable high risk of waiting for the pin to break. Moreover, waiting exposes you to the danger of the prices not making it to the chosen retracement level. If this happens, you lose out on good trade leading to opportunity and actual losses. Profitability of a particular method in this case depends on the position at which the pin bar closes. Even at riskier conditions, aggressive initial setting of the stop loss would lead to good trade setups leading to more deterministic conditions. To try luck on both ends, some traders opt to enter at both times with more money being invested in the more predictable entry point.
How and When to exit trade, take-profits and stop loss level settings:
When planning your exit, you should consider the prevailing market conditions at the time of exit. This leads to you being classified as either an aggressive or conservation trader. In such a case, conservative and aggressive traders use different exit strategies. The below discussion illustrates how and when to exit for aggressive and conservative traders.
Aggressive trading with ping bar strategy
Here, you enter a position when the right eye price repeats after the left eye close level. In addition to this, a commensurate take-profit level is placed farther. Setting it close to the next strong level offers the most prudent decision. This leads to automatic resistance to bullish positions. In such a case, you should set the stop-loss behind the nose-bar point. However, your reward-risk ratio may be affected in the event that your speculation fails to materialize.
Conservative trading with pin bar strategy
Conservative traders often set their entry point below the nose bar. However, this is in most cases above the nose bar in case of a bullish setup. In addition to this, the stop-loss is set behind the nearest support or resistance level below the eyes. As a consequence, a conservative take-profit can as well be set immediately above the left eye’s lowest point. For bullish trading, the take-profit level is set above the left eye’s highest level.
Spotting pin bar:
You can either use some indicators that detect pin bar or you can just keep an eye open to detect the pin bar. Remember strategy is only good in high timeframes so spotting the Pin Bar should be easy and you should have enough time to plan your entries.