How to determine if a Pin Bar signal is safe or not (Part 4)

How to determine if a Pin Bar signal is safe or not (Part 4)
How to determine if a Pin Bar signal is safe or not (Part 4)

Skilled hunters can always sniff out their prey. If you are a Pin Bar candlestick master, can you “smell” its aroma? If you do not know how to identify a safe signal from Pin Bar, this article will guide you to do it most easily. Don’t miss it or you will regret it. Now let’s go.

There are 4 criteria to consider when observing a Pin Bar pattern. When it appears, it makes a good entry even better. Now we will go into a rough assessment of the Pin Bar’s appearance as well as how it connects to the surrounding price zones.

Identify safety signals through the size of Pin Bar’s nose

You may already know what a Pin Bar candlestick pattern looks like. It’s important where the candlestick closes because that will tell you how effective it is. Now let’s talk about the theory of supply and demand, which makes Pin Bar more attractive.

When demand exceeds supply, prices will increase and vice versa when supply exceeds demand, prices will decrease. However, there will be many different prices at which supply and demand exceed each other. Simply put, the strength of the market will change depending on different specific situations.

So what impact does the above have on the shape of the Pin Bar? To answer that question we need to observe how the market reacts to Pin Bar highs and lows. How does the candle close? Is it close to the top-bottom or has a long tail?

For example,

Identify the signal of the Pin Bar candlestick through the size of the nose
Identify the signal of the Pin Bar candlestick through the size of the nose

After observing the chart, what can you see through the 2 Pin Bars that I mark? Does the second Pin Bar candlestick close far from the low but its nose is smaller than the nose of the first Pin Bar? What we need to find is the smaller the nose, the more prestigious the Pin Bar will be.

Note: The first Pin Bar can still be profitable even when it has a big nose. This standard isn’t necessarily required, but it’s still very useful when it does appear. It is not reliable only when it doesn’t meet the condition of a Pin Bar to be at least ⅔ candle long.

How to observe the safety signal of the size of Pin Bar

Maybe you will sometimes get bad entry points because the Pin Bar candlestick is too small. When I first started trading, I often made that basic mistake. You should remember that it is small when compared to the previous candlestick zones.

When the market was inertia and the price increased sharply up to 200 pips a day. Suddenly, an opposite Pin Bar appeared with a body of only 50 pips. And you hastily concluded this was a good entry point. In my experience, you would have a high chance of losing that order.

If you see that the Pin Bar candlestick is not commensurate with the surrounding price zone or you have to find it (because it doesn’t stand out from the candle cluster), it is best to ignore such an order.

Safety signal about the size of Pin Bar
Safety signal about the size of Pin Bar

Take a look at the chart above. The tail of the Pin Bar candlestick is very long compared to the previous candlesticks and stands out in the middle of the candle cluster. This is considered a very reputable Pin Bar pattern that is worthy of our entry.

Signals from the price and time of Pin Bar

Like the Pin Bar size correlation part above, price and time are used to read the market’s momentum (supply and demand).

The market is a description of price and time. Every chart has X and Y axes where X is price and Y is time. When the two are combined, we can accurately predict the upcoming price action.

If the market doesn’t show enough price or time (or both) at the reversal Pin Bar candlestick from the previous highest or lowest point, it is not safe enough to trade.

For examples,

Price and time are not enough to confirm Pin Bar signal
Price and time are not enough to confirm Pin Bar signal

When the price penetrated the support zone at 1.12725. It had 17 candles moving below creating a swing low. It made sense to wait for the Bearish Pin Bar at the resistance level to enter a Sell order.

However, instead of waiting for 17 candles or more, the market retested it within the next 2 candles. That shows that there was a very strong demand right below this price. So as soon as Pin Bar appeared, it was necessary to analyze it carefully.

As a result, that Pin Bar was wrong. The buying force from the previous days was more overwhelming than the selling force, so the price could not decrease. Because the time between the low and the retest is not enough.

A perfect retest should be like this

Price and time are enough to confirm a safe Pin Bar signal
Price and time are enough to confirm a safe Pin Bar signal

Notice the extra space and time required for this example. If the price creates a gap like this instead of the example above, it will probably form a nice Pin Bar to trade.

With such a candlestick position, it shows that even if the demand appears below, it is not enough to defeat the supply force of the Pin Bar.

Has the price been confirmed by the Pin Bar candle?

To prove something, we need to test it. And we use Pin Bar to test the strength of some important price levels.

There are two important price checks used by traders

1. Instant bounce off the price

2. Tails pierce the price level

Many of you mistakenly believe that the first type is the most ideal. Because it bounces as soon as the price touches the important zone we are watching. However, with my experience, Pin Bar with a tail piercing through the price is the best opportunity. That’s not to say the first type isn’t good, but it’s not very secure.

Take a look at the following 2 examples to better understand these 2 types of tests

Pin Bar reacts instantly to the price

A bullish Pin Bar in a standard shape appears at a key price level. However, the market cannot fully test that zone. The fact that the market has reacted strongly to this price level shows that there is demand above the price level. But below the price level is not clear. What if the price support zone is really below, it’s extremely dangerous.

Pin Bar reacts instantly to the price
Pin Bar reacts instantly to the price

Pin bar penetrates the key price level

Similar to the example above, this is also a very nice and standard Bullish Pin Bar. The difference is that it has checked the entire zone below. When you see the candle’s tail penetrate this price, it shows that the demand below is very strong.

Pin Bar penetrates the key price level
Pin Bar penetrates the key price level

This type of Pin Bar shows very strong demand both above and below this price. Safe signal when the Pin Bar candle is confirmed and above that important price level.

Those are all 4 main criteria to consider whether to trade on Pin Bar. That does not mean that I will not open a trade if all the above factors are not satisfied. It’s just that the more satisfied you are, the more confident you will feel when opening an order. Wish you success when trading with Pin Bar candlestick.

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How to determine if a Pin Bar signal is safe or not (Part 4)
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