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Pin-Bar candlestick pattern: a reliable signal of a trend change

Pin-Bar candlestick pattern: a reliable signal of a trend change

As you know, trend trading is the most profitable and is used by everyone: from beginners to large market makers and hedge funds. But, despite the outward simplicity, this strategy has two problems: to find the point at which a strong movement begins and, more importantly, to determine the moment when it ends. In this article, you will learn how to binary trade with the Pin-Bar pattern, take profit in time or open a countertrend trade.

This pattern is part of the Price Action method, which is positioned as a further development of candle analysis. It is fair to say that it is not completely clear what the «development» is other than renaming standard graphics models. The same Pin-Bar is one of the special cases of «Doji» - candles with a small or absent body and long shadows. Doji is also a reversal signal and the principles of its development can be successfully applied in Price Action. 

We can say that Price Action is a method, not a trading system with clear rules. A trader can use it in combination with free binary signals or an indicator strategy. As practice has shown, you can achieve up to 30% increase in average profit.

Basic structure

The name was coined because of the type of central candle similar to the nose of the fairy-tale hero Pinocchio – the larger, the more reliable signal. The Pin-Bar pattern can be formed at the end of both an uptrend and a downtrend. The classic version looks like this:

For the Pin-Bar to be considered formed; the following conditions must be met:

• The body of the central candlestick is absent or does not exceed 20% of the length of the «nose» If this condition is not met, the model is not considered correct and beginners should miss the live binary signal;

• «Nose» extends far beyond the «eyes», but its body should be completely inside them and as close as possible to the closing price, which according to classical candle analysis is considered a «hammer» (bullish Pin-Bar) or «inverted hammer» for a bearish one.

The central candlestick cannot be an inside bar, another basic construction of Price Action. It is considered a trend continuation pattern and only in rare cases is it followed by a from the binary options signal service

• The closing of the pattern is always near the open price or outside the left eye;

• On the chart, you can find quite a lot of areas where there are combinations of candles similar to Pin-Bar, especially on lower timeframes. Even if they are "correct", choose for the entry point those that are near:

- Intraday support/resistance levels;

- Significant price highs/lows: week, month or daily with high volatility;

- Fibonacci levels if there is a correction of the main trend;

- Moving Averages, especially for long periods, for example, 200-day;

- Zones where several levels are located (merging); 

- The Pivot Point;

If the shadow does not go beyond the previous bar and the general price movement as shown in the figure, then we have a false pattern. Thus, we have before us not a reversal pattern, but a short-term pullback, after which the trend continued. At the same time, the correct candlestick combination shows a new high or low with a subsequent reversal.