pin bar candles

Pin bar candlestick is 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.

Key Takeaways🔑

Pin bar candlesticks are a valuable tool for identifying potential trend reversals in the market.
Traders can use pin bar candlesticks in combination with other technical analysis tools to improve accuracy and confirm signals.
Practice using pin bar candlesticks on a demo account to develop a deeper understanding of this trading technique.

What is a pin bar candlestick?

pin bar candlestick can be bearish or bullish
Pin bar candlestick can be bearish or bullish

The pin bar candlestick 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.

What does a bullish pin bar mean?

This pin bar signals an impending uptrend. During a downtrend, this pin bar forms at the trend exhaustion point. Its 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 bar candlestick

This pin bar signals an impending downtrend. During an uptrend, the bearish pin bar forms at the trend exhaustion point. Its 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 candlesticks 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.

pinbars in action

Trading using pin bar candlestick 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 vice 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 an orange candle appears after a bearish pin bar, you should enter a sell position.

Pros and Cons of Trading with Pin Bar Candlesticks👍👎

Pros:

  • Pin bar candlesticks are easy to identify and interpret.
  • They can be a reliable indicator of trend reversals when used correctly.
  • Pin bars can be combined with other technical analysis tools for more accurate signals.

Cons:

  • Pin bar candlesticks can generate false signals, especially in volatile markets.
  • They are most effective in trending markets and may not be as useful during periods of consolidation.
  • It may take time and practice to master trading with pin bar candlesticks.


Bullish Pin Bar Features Bearish Pin Bar Features
Small body at the top with a long downward-pointing shadow. Small body at the bottom with a long upward-pointing shadow.
Signals an impending uptrend after a downtrend. Signals an impending downtrend after an uptrend.
Buyers push prices higher after sellers initially drive them lower. Sellers push prices lower after buyers initially drive them higher.


Meaning of pin bar on the chart

For those who follow the candlestick analysis, this pattern is a strong signal of a future trend reversal. If the wick of a pin bar candlestick points up the price is predicted to go down.

Wick and price direction after pinbar
Wick and price direction after pinbar

If the wick of a pin bar candlestick points down that price is predicted to go up.

Ideal pin bar

Pin bar body and previous closing price
Pin bar body and previous closing price

Traders consider an ideal reversed pin bar a candlestick with two comparable obligatory criteria:

  • Pin bars open and close levels are placed next to the previous bar closing near either the top or the bottom.
  • Pin bars open and close levels are placed within the previous bar known as the left eye.
Previous body with pin bar
Pin bar candlestick within previous bar body

In this case most traders consider this pin bar to be a powerful signal for the purchase of the option.

A final word on the pin bar candlestick

Pin bars are one of the most popular candlestick formations. As with other patterns, they must be preceded by a directional movement of the price. A bullish pin bar should be preceded by a downward movement. A bearish pin bar, on the other hand, is only relevant if it is preceded by an upward movement. A trade based on pin bars is best confirmed by an additional element derived from chart analysis. Horizontal support and resistance levels, trend lines and Fibonacci levels will work great as confirmation.

Some traders also use pin bar candlestick with technical analysis indicators. Here, long term moving averages, such as the EMA200, work well. Indicators drawing a price channel like Bollinger Bands, Keltner Channel or Donchian Channel can also be helpful in indicating places on the chart where the price can make a pin bar turn. In the case of channels, the upper and lower barriers will just define potential turning points.

At IQ Option Wiki you can read other articles on how to trade pin bars and how to combine pin bar with Bollinger Bands to find great trading opportunities.

Now that you've learned about the pin bar candle and how to trade with it, try it out on your IQ Option practice account today. Then, share your results in the comments section below.

Good luck!


Q&A: Common Questions About Pin Bar Candlesticks❓

  • Q: How can I tell if a pin bar is a reliable signal?
    A: A reliable pin bar signal typically has a long wick, forms during a trending market, and is accompanied by other technical analysis tools such as support and resistance levels, trend lines, or moving averages.
  • Q: Can I use pin bars for short-term trading?
    A: Yes, pin bars can be used for short-term trading, but it's essential to adjust your trade duration based on the time frame of the chart you're using.
  • Q: Are pin bars useful in all market conditions?
    A: Pin bars are most effective in trending markets, but they may not be as useful during periods of consolidation or choppy market conditions.
  • Q: How can I minimize false signals from pin bars?
    A: To minimize false signals, use pin bars in combination with other technical analysis tools and confirm their signals with additional indicators or price patterns.
  • Q: Can pin bars be used with any trading instrument?
    A: Pin bars can be applied to various trading instruments, including forex, stocks, indices, and commodities, as long as they are traded on a chart that displays candlesticks.

GENERAL RISK WARNING

The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.
Kindly note that this article does not provide any investment advice. The information presented regarding past events or potential future developments is solely an opinion and cannot be guaranteed as factual, including the provided examples. We caution readers accordingly.

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Niels Hammer

Trading and investing are lifelong pursuits for me, and I will most likely never stop learning about them. I started trading with IQ Option in 2014 and have been with them ever since. And I've seen the platform mature. Nowadays, I'm very interested in cryptocurrency and am attempting to learn and invest my time and money in it. On the other hand, I try to help you guys as much as I can with this blog. Happy trading!

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