Both bullish and bearish pin bars are popular candlestick formations for trading. Their true strength is revealed when we combine them with other elements of technical analysis. Today we will show you 2 effective trading setups combining pin bars with support and resistance lines. This strategy will allow you to successfully play out trend reversals.
- 1 Overview of the Pin Bar candles
- 2 Using Pin Bar candles alongside support and resistance
- 3 Trading using Pin Bar candles with support and resistance on IQ Option
Overview of the Pin Bar candles
Pin bar candles are a special type of candle. They consist of a fairly small body with a long wick either at the top or bottom of the body. The long wick is at least twice the size of the body. The opposite end of the body might have a small wick. Pin Bar candles can be either bearish or bullish.
Importance of knowing the Pin Bar when trading
Pin Bar candles form when the battle between bulls and bears is intense. For the bearish pin bar, the body shows that sellers dominated the markets. However, bulls step in driving prices up. But eventually, the bears won the battle in that particular session. The opposite is true about bullish Pin Bar candles.
What is a bearish pin bar?
A pin bar is a single candlestick formation. We can say that it is an asymmetrical formation. A very narrow body in relation to the shadow is located at the top or bottom. A bearish pin bar has the body at the bottom and a long shadow pointing upwards. This shadow can be said to mean that the price did not want to be on the upside, hence the bearish nature of this formation. The opposite of this is of course the bullish pin bar.
Overview of support and resistance
Support and Resistance levels are simply ranges where the price seems to bounce off. The support forms when prices don't seem to go lower than a certain range before bouncing back up. Resistance forms when prices don't seem to rise beyond a certain range before falling again. For more about these levels, the Guide to Setting Up and Trading Using Support and Resistance on IQ Option will get you started.
Using Pin Bar candles alongside support and resistance
Once the price hits a support or resistance level, it's very difficult to determine whether it will break out or reverse. However, an easy way to know that it will reverse is when a pin bar occurs at this level. Take a look at the image below.
Once the prices touch the support or resistance range, two things can happen. The first is that the prices can break out of this level forming a new trend. The other is that the prices will reverse. A Pin Bar forms when buyers or sellers step in to prevent the prices from going further up or down. It takes a good eye to identify these instances which technical analysis proponents call a false breakout.
So when trading using Pin Bars alongside support and resistance, use the following rules:
- When the prices reach the support level and a bullish pin bar forms, enter a buy position.
- When prices reach the resistance level and a bearish pin bar forms, enter a sell position.
- If you're using a 5-minute candle interval chart, your trades should last 10 minutes or more.
Trading using Pin Bar candles with support and resistance on IQ Option
Enter into a sell position when the bearish pin bar reaches the resistance level
Below you can see a 5-minute chart of EURUSD. The market was moving upwards and encountered price resistance. It was clearly possible to draw a line that the price did not want to cross. I have marked a bearish pin bar candlestick in the circle. It is the signal for a sell position.
Enter into a buy position when the pin bar forms on the support level
On the next EURUSD chart, we see a respected resistance level on the left. The price finally breaks through this level. The so-called change of poles takes place and what was resistance turns into price support. Note that just after breaking through this resistance level the price made a pullback constituting new support for the price. In the circle, I marked a bullish pin bar which is here an obvious signal to open a buy position.
Now that you've learned how to trade using bullish and bearish Pin Bar candles alongside support and resistance, try out this technique on your IQ Option practice account today. Share your results with us in the comments section below.
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