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Things you need to know about the Forex pin bar

Trading the Forex market is one of the most complicated tasks in the world. More than 96% of retail traders are losing money since they don’t have the skills to analyze the price movement with a high level of accuracy. Most of the time, naïve traders are using complicated indicator based trading system and losing money. So, is there is any way we can easily learn to make a profit at trading? Well, the answer depends on your learning and adaptability skills. No matter which trading method you choose, you need to understand the strategy from the core.

Though there are different types of trading method, the price action trading strategy has gained huge popularity over recent years. The strategy is based on the different formations of the Japanese candlestick patterns and the pro traders use the reliable candlestick pattern to execute trades with an extreme level of precision.

So, do we need to learn hundreds of candlestick patterns?

It’s true, that you can trade the market by using more than hundreds of candlestick patterns. But memorizing all this pattern is a very complex task. So, how does the pro traders deal with the different candlestick patterns? The answer lies within their simple approach. Experienced price action traders love to trade the most powerful candlestick pattern so that they have a higher percentage of winning trades. Today, we are going to discuss about the simple pin bar used by the pro UK trader.

Use of simple pin bar

A pin bar is a single candlestick pattern that is usually found at the bottom of a downtrend or the top of an uptrend. Usually, the pin bar acts as the price reversal pattern. Identifying the pin bar is easy since it has a smaller body and a long wick or shadow. (Usually, the wick is at least three times longer than the body). Based on the direction of the wick, we can identify the nature of the pin bar.

Execution of the trades

You need to look for the bearish pin bar when the price hits a critical resistance level. To execute the long orders, you need to find the bullish pin bar when the price hits a critical support level. But make sure you always use a professional broker so that you don’t have to deal with technical problems while analyzing the complex price movement. Get more info about the broker before you start investing a big sum of money. Once you find the right broker, start placing the stops. Make sure you also learn about the stop loss placement so that you don’t have to risk a big sum while trading the critical levels using the pin bar.

The traders usually place the stop right above the tail of the pin bar for the short trade setups. For the long entry, the stops are usually placed below the tail of the bullish pin bar. However, you should not be using too tight stops as the market often hunt down the tight stops.

Since the pin bar trading strategy is based on a single candlestick pattern, the traders are advised to use the pattern in the higher time frame (preferred time frame: H4, D1, W1). Naïve traders often think this pattern is only used to trade the reversal. But the pin bar can also be used to find the endpoint of the retracement. For example, let’s assume the EURUSD pair is in a strong uptrend. All of sudden the price started to drop in the EURUSD pair. The sudden drop in the price is known as bearish correction and it’s most likely to end near the minor or major support level. To find the endpoint of the bearish correction, look for the bullish pin bar.

Conclusion

It must be clear that the pin bar works as an excellent pattern to execute the trade. But learn to use this pin bar in the demo account so that you can trade the market with confidence. Trade with low risk to keep your capital safe.