Pin bar candles are a special type of Japanese candle. It has a distinct shape that makes it easy to identify on your chart. This guide will teach you how to use this candle type to trade on IQ Option.
Overview of the pin bar candle
The pin bar candle has a small body. It also has one long wick which is at least two thirds the overall length of the candle. The opposite end of the candle body can have a small wick or not.
This special candle represents a sharp price reversal or rejection and often appears along a trend. Therefore, you should expect to find bullish and bearish pin bar candles on your chart. In addition, pin bars are only useful for trading when markets are trending.
Bullish pin bars
This pin bar signals an impending uptrend. During a downtrend, this pin bar forms at the trend exhaustion point. It's small body forms at the top with a long downward pointing shadow. This shows that as sellers pushed prices lower, the bulls jumped in driving prices higher. Once this candle forms, you should enter a buy position.
Bearish pin bars
This pin bar signals an impending downtrend. During an uptrend, the bearish pin bar forms at the trend exhaustion point. It's small body is at the bottom with a long upward pointing shadow.
This indicates that buyers are trying to push prices higher. However, the sellers jumped in and drove the prices lower. Once the pin bar is completely developed, you should enter a sell position.
Two ways to trade using pin bar candles on IQ Option
In order to effectively trade using pin bar candles, you must ensure 2 conditions are met. First, you must wait until the pin bar is fully developed. The longer the pin bar tail, the better. Second, the pin bar must form during trending markets.
Trading using pin bar candles during trending markets
As mentioned before, pin bar candles are a signal of trend exhaustion. So if a pin bar develops along an uptrend, it's a signal that the trend is about to reverse and vise versa. If you're using 1 minute interval candles and you notice a pin bar develop along a trend, wait until it's fully developed. Then, enter position in the reverse trend.
Note that if you're using 1 minute interval candles, your trades should last about 5 minutes.
Trading pin bar candles based on their color
You might have noticed that bullish pin bars can be orange in color. On the other hand, bearish pin bars can be green in color. So how can you trade pin bars using their colors?
The answer lies in the nest candle that forms after the pin bar. If a bullish pin bar appears, the next candle will very likely be green in color. Conversely, if a bearish pin bar appears, the next candle will likely be orange in color. So if a green candle develops after a pin bar, you should enter a buy position. If a orange candle appears after a bearish pin bar, you should enter a sell position.
Now that you've learned about the pin bar candle and how to trade with it, try is out on your IQ Option practice account today. Then, share your results in the comments section below.
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