Definition of a pin bar
Pin bar stands for the name of an elongated candlestick bar, "Pinocchio" bar. The candlestick has a tail or axis (wick) that is longer than the body (body). Pin bars are often found on daily trading charts and can appear on all time frames.
Characteristics of pin bars
# A pin bar has a tail that is longer than its body. This tail is also called a shadow or shadow.
# The length of the tail indicates the strength of rejection or the occurrence of a false break at a certain price level. The longer the tail of a pin bar, the more valid the pin bar will be, in this case, it means the higher the sentiment of rejection of a certain price level.
# The narrower or the smaller the body of a pin bar, the more valid the pin bar will be.
#In general, it can be concluded that a pin bar is considered valid if the tail length is approximately two-thirds of the total length of the pin bar.
#The other side of the tail is called 'nose' (nose). The shorter the nose the more valid the pin bar will be.
Bullish formation and bearish reversal pin bar
Bullish reversal pin bars are usually formed in a downtrend and indicate the possibility of a reversal towards the uptrend after a certain level of resistance is shown according to the tail pin bar, while a bearish reversal pin bar is formed in an uptrend and indicates a possible reversal towards the downtrend after resistance at a certain price.
The tail in the bullish reversal pin bar formation is at the bottom of the body because it shows a refusal to break the lower price level, while the tail in the bearish reversal pin bar formation is at the top of the body because it shows a refusal to break the higher price level. Because the formation of a pin bar is a bar that protrudes between the bars before and after it, the confirmation of the pin bar's validity is at the bar after the pin bar is formed.
Confirm reversal of pin bar
In order for a bullish reversal pin bar to be confirmed, the length of the candlestick bar after the pin bar (body and tail) must all be higher than the pin's lowest level, and the closing price must be higher than the pin bar closing price. While for confirmed bearish reversal pin bar, the length of the candlestick bar after the pin bar must all be lower than the highest bearish pin bar level, and the closing price must be lower than the pin bar closing price.
Trading with a pin bar formation
Often the pin bar formation shows a trend reversal pattern, although there is also a pin bar that indicates the direction of the trend. There are 3 possible ways for entry in the bar after the pin bar, namely:
Market entry: entry at the market price that is considered the best at that time. Entry buys if a bullish reversal pin bar is formed, and sell entry if what happens is a bearish reversal pin bar.
Stop entry: i.e. a pending order in the form of a 'buy stop' for a bullish pin bar reversal and 'sell stop' for a bearish pin bar reversal. The pending value of a buy stop order must be higher than the current market price, and the value for a sell stop order must be lower than the current market price. The stop loss level can be determined by a few pips below the lowest level of the pin bar (for the buy stop), or a few pips above the highest level of the pin bar (for sell stops).
Limit entry: i.e. a pending order in the form of a 'buy limit' for a bullish pin bar reversal and 'sell limit' for a bearish pin bar reversal. The pending value of buy limit orders must be lower than the current market price, and the value for sell limit orders must be higher than the current market price. The stop loss level can be determined by a few pips below the lowest level of the pin bar (for buy limit), or a few pips above the highest level of the pin bar (for sell limit). This limit entry is based on the assumption that usually the price movement will retrace or experience a correction when it has reached 50% of its tail length or 50% of the Fibonacci retracement level
It should be noted that the probability of entry that we do is high, it is recommended for entry on the bar after the pin bar only if accompanied by sufficiently strong supporting factors, including support or resistance levels, Fibonacci retracement levels or expansion especially 38.2%, 50 % or 61.8%, and the moving average indicator curve as a level of dynamic support or resistance.