- 2 A powerful Pin Bar and Inside Bar trading strategy
- 3 Trading with the use of the pin bar and inside bar trading strategy
- 4 Pros and Cons of Pin Bar and Inside Bar Trading Strategy 📊
- 5 A handful of advice on trading with the pin bar and inside bar trading strategy
- 6 Short Q&A on Pin Bar and Inside Bar Trading Strategy 💡
- 7 GENERAL RISK WARNING
A powerful Pin Bar and Inside Bar trading strategy
Trading with pin bar and inside bar trading strategy is part of a price action technique. Pin bars indicate that the price level is rejected and you can expect the reversal soon. Inside bars inform about the consolidation in prices and a possible breakout. Used together, give powerful combinations that are called inside bar – pin bar combo and pin bar combo patterns.
- The pin bar – inside bar combo pattern is built on the inside bar which is engulfed by the previous pin bar (the whole inside bar is located within the pin bar’s price range).
- The inside pin bar combo signifies that the pin bar is the inside bar at the same time. This means the pin bar is situated within the outside mother bar which is also a pin bar.
Trading with the use of the pin bar and inside bar trading strategy
It can get confusing in terms of terminology. For the sake of order, let’s assume that we will call today’s two patterns as pin bar and inside bar trading strategies. Both set-ups will be discussed in more detail.
Pin bar and inside bar combo pattern
Observe the price chart carefully. Look for the pin bar. When you spot one, wait whether the inside bar will develop after it or check if that pin bar is inside the preceding candle (mother bar). When the inside bar appears and is consumed by the pin bar, you get the pin bar – inside bar combo pattern. Ideally, the inside bar will be located within the pin bar’s body.
With this combo pattern, you can trade binary options, but you need one more element. And that is the existence of important support/resistance level.
Look at the exemplary chart below. There is the uptrend with a pullback to the support level. At this moment, a pin bar has developed. It is followed by not one, but two inside bars. Your entry point is right after the combo pattern. With 5-minute period candles, you should keep the position open for at least 30 minutes.
In the next picture, the resistance line is drawn. The price reaches the resistance and a bearish pin bar is formed with the following inside bar. This shows the false breakout from the resistance level after which the price moves downwards. Enter the sell position right after the combo pattern and hold it for at least 30 minutes when using 5-minute period candles.
Is inside bar trading profitable?
A trade based on a normal inside bar is a popular technique. A breakout from the formation starts a directional movement of the market. Identifying inside bars where we can expect returns makes a lot of sense and can be profitable. So if you see an inside bar at an important support/resistance level, a Fibonacci level or an important respected moving average, you can use this situation in your trading. Today’s inside bar trading strategy combines this pattern with the other, which is the pin bar. So we have a pattern within a pattern, which makes today’s set-up an even better version of the normal inside bar pattern.
Trading with the use of the inside – pin bar combo pattern
Take a look at the chart below. There is a strong uptrend. At some point, the inside pin bar combo pattern develops. Once you recognise the pattern, you should trade along with the trend and open a buy position.
Now, the situation in the market is the opposite. The price is running abruptly downwards. Then, the inside pin bar pattern appears. It gives the signal that the trend will continue in the previous direction. Thus, you should open a sell position right after the inside pin bar combo pattern.
Pros and Cons of Pin Bar and Inside Bar Trading Strategy 📊
- Identifies potential reversals and breakouts.
- Works in both trending and ranging markets.
- Relatively easy to understand and implement.
- Requires discipline to follow the strategy.
- False signals can lead to losses.
- May not work well in choppy or fast-moving markets.
|Pin Bar and Inside Bar Strategy Components
|A single candlestick pattern that indicates a potential reversal in price direction.
|A candlestick pattern that forms within the range of the previous candle, indicating consolidation and potential breakout.
|Pin Bar and Inside Bar Combo
|A combination of the pin bar and inside bar patterns, offering more reliable trading signals.
|Important price levels where the price tends to reverse or consolidate, used to improve the accuracy of trading signals.
|Markets with a clear directional movement, where the strategy can be particularly effective.
A handful of advice on trading with the pin bar and inside bar trading strategy
Follow the price movements in your chart and look for the pin bars that are followed by the inside bar.
Open the position the moment the pattern is completed to get the chance for higher profits.
Use the pin bar and inside bar combo patterns as reversal signals on important price levels.
In the trending markets, search for the inside – pin bar combo pattern which is the continuation pattern.
Try recognising the pin bar and inside bar combo patterns in the IQ Option demo account first. You will not risk your money and you will get time to practice trading with this powerful strategy.
Tell us about your experience in trading with the pin bar and inside bar trading strategy on the IQ Option platform. If you have your inside bar forex trading strategy, share it with us in the comments below.
Short Q&A on Pin Bar and Inside Bar Trading Strategy 💡
- Q: Can the pin bar and inside bar trading strategy be used for any financial instrument?
- A: Yes, this strategy can be applied to different financial instruments, such as stocks, forex, commodities, and indices, as long as the price action can be analyzed using candlestick charts.
- Q: How do I identify a valid pin bar?
- A: A valid pin bar has a long wick (nose) in one direction, a small body, and a short wick on the opposite side. The long wick should be at least two-thirds of the entire candle’s length, while the body should be relatively small.
- Q: Can I use different timeframes for this strategy?
- A: Yes, the pin bar and inside bar trading strategy can be used with different timeframes. However, keep in mind that shorter timeframes may generate more false signals, while longer timeframes may require more patience.
- Q: How can I minimize the risk of false signals?
- A: Combining the pin bar and inside bar patterns with important support/resistance levels or other technical analysis tools, such as trend lines or moving averages, can help improve the accuracy of trading signals and minimize the risk of false signals.
- Q: How long should I hold a position when trading with the pin bar and inside bar strategy?
- A: The holding period will depend on the timeframe and market conditions. For example, when using 5-minute period candles, holding the position for at least 30 minutes is recommended. Always consider your risk management strategy and personal trading style when determining the holding period.
GENERAL RISK WARNING
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