Forex Trading Method With Pin Bar At Support And Resistance Level
Note: pin bar is the author’s term for the title of a bar that is considered a benchmark. A pin bar is a basic reference in the strategy of trading with price action. The explanation for the pin bar has been discussed in several articles in this rubric. Price action trading strategies using support and resistance levels for confirmation are very effective trading methods.
Note: pin bar is the author’s term for the title of a bar that is considered a benchmark. A pin bar is a basic reference in the strategy of trading with price action.The explanation for the pin bar has been discussed in several articles in this rubric.
Price action trading strategies using support and resistance levels for confirmation are very effective trading methods. In price action, the support and resistance levels are called the key level.
In this method, the formed pin bar is confirmed again with the key level, to determine the pin bar’s strength in indicating market conditions.
Overview of pin bar formation: if a valid pin bar formation is established, trend forwarding, reversal or indicating a trend correction (retracement) will occur.Not all valid pin bar formations give a signal that is also valid, or maybe a valid but weak signal. It must also be combined with other factors that are supportive and quite significant, namely key levels. In real market conditions, the key levels are the support / resistance levels, either static (horizontal) or dynamic (exponential moving average) and Fibonacci retracement levels depicting support and resistance points. If there is a combination that supports a pin bar formation, or there is a confluence between the pin bar and its supporting factors, then the indicated trading signal will be very strong and accurate enough.
In the EUR / USD daily example, the following shows a combination of valid pin bars with resistance levels indicating trend forwarding.
In the next example, GBP / USD daily, what happens is the reversal of the pin bar, which is the pin bar formation that is formed on the reversal of the trend or correction of the trend (retracement). In this case the supporting factor is the 61.8% Fibonacci retracement level. Note that with a pin bar reversal plus a sufficiently valid confluence factor, the take profit level we earn will be sufficient.
What if market conditions ranging or sideway?
The next example (EUR / JPY daily) is a pin bar formation which is formed in a sideway market condition, where the second pin bar confirms the previous pin bar indicating the support level. If we are in doubt for the entry when the first pin bar formation occurs because the sideway support level is not yet clear, then the next pin bar formation clearly confirm the support level. And, as said before, pin bar reversal formations have the potential to set a fair profit-taking level.
Look again at this example, what is the level of our take profit if the last entry in the pin bar formation …
For supporting factors with dynamic levels (usually exponential moving average) if you are happy and familiar with this indicator, the following example on USD / JPY is. It’s just that because moving averages are lagging indicators (slow in anticipating price movements), we must be patient enough for entry, given that when the pin bar formation occurs, the ema indicator doesn’t support it, only after the ema line has been exceeded, we can enter with the take level profit is very adequate for the long term.
There are times when the market consolidates before the forwarding or reversal of the trend occurs. The consolidation pattern is sideway, and if you like playing with pattern formation (triangle, flag, etc.), it’s good to be combined with pin bar formation. The picture further exemplifies it. After the pin bar touched the sideway resistance level three times, there was a trend forwarding although pin bar was not formed at the support level.
From some examples above, it can be concluded that:
– Trading with a valid pin bar formation, and combined with key levels is very potential to gain an adequate profit.
– To get high trading accuracy and avoid signal errors, it is recommended to trade with a daily time frame.
– Indicators or other supporting factors may be used (such as chart pattern in the last example), but which is always our handle is the pin bar formation that is formed along with the rules of application.
Source: Nial Fuller – www.learntotradethemarket.com