Trading The Pin Bar – A Candle To Watch

Aside from my short-term technical indicator and longer term fundamental analysis, I am also a student of Japanese Candle Sticks. The formations created and the understanding of “what they suggest” (with respect to pure price movement) can be an extremely valuable tool for traders of any asset class.

Price is price no matter what you are trading, so learning to recognize and understand the “shapes and patterns” of a given candle or “series” of candles is a skill that you’ll eventually want to come as second nature.

The “Pin Bar” is a fantastic candle to keep your eyes open for as it usually suggests that price has been soundly rejected at a certain level and has moved quite dramatically during the duration of the candle. Lets have a look, as I had suggested “looking out for these” in both NZD/USD as well AUD/USD earlier in the week in the comments section.



You can see that price “originally” was as high as the “upper wick” of the candle extends, but as the week progressed continued lower, and lower to finish / close the candle at the absolute opposite end / lowest portion of the formation.

What does this simple “graphic representation of price action” tell you about the entire week’s activity? You’ve got it – in a single glance you’ve deduced that NZD/USD was literally “sold” right from the start of the week.

A simple strategy some traders look to employ – is to simply place a “sell order” under the low of the pin bar candle…and allow further movement in price to pick up them up as price continues to move lower.

Re entry in a number of pairs (obviously NZD/USD) is looking good however it appears that markets are stalling / sitting idle here. I’ve got several open trades but see the weekend coming and will look to re-evaluate before close here on Friday.

10 Responses

  1. Q. January 17, 2014 / 11:44 am

    Interesting, I’ve recently discovered the power of this stuff and it’s made a difference. A quick question if I may Kong, what time frame do you consider to be the heart of the forex market? I’ve read various opinions. Would love to know yours.
    Many thanks.

    • Forex Kong January 17, 2014 / 12:55 pm

      Ahh yes….the age old question of time frames.

      It really depends on the trader but if I’ve established trend on a 1H time frame, I can quite easily jump in and trade it.

      Do I?

      Only once I’ve seen things on higher time frames fall into place so…..I guess I’d have to say….

      If you where of the mind set to set “considerably wide stops” and try to just “let things ride” – the 4H time frame will usually produce a reasonable “trend” as well a long enough period of time in “said direction” for you to capture a portion of the move.

      Now…..that still doesn’t mean you are in the clear by any means as…..even “then” hour to hour volatility in any given pair can still scratch your trade.

      My trading takes place when “stars align” on multiple time frames where very VERY specific criteria is met ON ALL.

      Take January for example……I didn’t move a muscle for 14 days – then did 7% in less than 72 hours.

      Hope it helps.

      • Forex Kong January 17, 2014 / 1:00 pm

        Japanese Candle Sticks simply put a given amount of time’s “price action” into a simple graphic representation so……

        In the example of NZD/USD one can quickly assess that “wow! – a full 5 days trading and the price has moved allll the way down from the highest point of the wick… close the week at the very bottom.” What are the odds that “next week” we are gonna go allllll the way back and then “even higher”?? Hmm…….

        I think this pair is headed lower.

        Then the same thing can be applied on smaller time frames….as a pin bar “usually” suggests that a change / shift in price movement has taken place.

        Following the candle “after the pin bar” is also valuable – if of course you can resist pushing the “sell button” first.

  2. JSkogs January 17, 2014 / 2:20 pm

    Looks like the yen is going to break out of the short term congestion to the upside very soon. Enjoy the weekend, Kong! Thanks for all the posts and feedback. Was a good week and next should be even better!

    • Forex Kong January 17, 2014 / 6:45 pm

      Been out celebrating… week really as…..the trend hasn’t even rolled over yet!

      Nothing but smiles here as……this week was just flat at 7%.

      We’re gonna do fine in coming weeks…..juuuuuuuust fine.

      • Farhan Nasir (@FaniNasir) January 18, 2014 / 1:27 am

        Kong ,, i asked you about going long on GBP/NZD and you said its a chance so better to sit out ,, well now look at the pair going long would have been a good idea ,, but you’re the expert here so gonna listen to you ..

        • Forex Kong January 18, 2014 / 1:45 am

          How many days ago had you asked? Man… “just moved” 250 pips in a couple hours.

          He he he…..I can’t be ” all things to all people” Farhan –

          We can’t catch em all.

  3. Farhan Nasir (@FaniNasir) January 18, 2014 / 2:11 am

    2 days ago i think ,, 250 pips in a couple of hours like you said these pairs can move 2 to 3 hundreds in a day ,,

  4. Jerry C January 18, 2014 / 9:53 pm

    It would be extremely helpful to know where you placed your stops in case you are wrong on your Dollar and Yen trades? Anything you can do to help?

  5. price action March 7, 2014 / 5:29 am

    Price is not at all an issue while trading but I think no trading is possible if you do not know the exact value of the goods in the market you are trading within. The above post about the trading the pin bar is quite appropriate and one can ascertain some good knowledge from the same.

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