Well, here we go with another strategy that may help you pick some good winners. It’s known as the Pin bar method and commonly used in the world of trading by a lot of pro traders.
This method has been around for quite a while now and works best on the higher timeframes from 4-hour to monthly. Yeah, you are right, you will not come across a lot of trades when you are dealing with the bigger timeframes but you will be in for some big moves making you big bucks when the set-up is right.
Remember, you must have the hunter's approach, striking your prey with one shot, one shot only. The only way to do this is to wait patiently for the right time to pull the trigger.
You will be amazed by how simple but yet profitable this method is. If you are like me and hate sitting in front of your laptop all day long then this method is definitely for you. It takes on average only 5mins to find the correct set-up, no more no less.
Enough with all the mumbo-jumbo and lets get down to business.
There are two types of pin-bars:
1. Bullish Pin-Bar
2. Bearish Pin-Bar
Bullish Pin-Bar:
Interpretation: For a valid Bullish Pin Bar, price must move down forming a long pin at least twice the size of the head (distance between the close and open) and return to close at or higher than the low of the previous bar.
Bearish Pin-Bar:
Interpretation: For a valid Bearish Pin Bar, price must move up forming a long pin at least twice the size of the head (distance between the close and open) and return to close at or lower than the high of the previous bar.
It is very easy to pinpoint those types of bars in a day’s session, sometimes though you may come across one of those after 2-3 days or more depending on the timeframe you are trading. However, it is a highly profitable method if you use it properly.
I personally use this system in a 4-hour chat (the bigger the timeframe better will be the signal).
Let’s open a chart and pick those bar formation.
From the above chart you will be able to see two different pin-bar formation, one bullish and the next one bearish. You may see that when bullish bar was formed, price rallied all the way up and when bearish bar was formed price moved in the opposite direction.
Now this is a great strategy to use in a trending market, you just need to draw your support or resistance level and when price retrace to those levels wait for a pin-bar formation and take your position in the direction of trend. Very easy indeed and the simpler it is the more profitable it will be.
I bet you can’t wait to pick those bar formation. To help you even more here is a good way of entering the market with minimum drawback. Once the pin bar is formed, draw the fib line connecting the high to the low of the bar.Now wait for the price to retrace to the 50-fib level then place your trade with your stop loss to the nearest peak as seen below:
60% of the time price does retrace to the 50-fib level before going up or down after a valid pin bar is formed. This is a great entry point as it will greatly reduce your stop loss thus minimizing your exposure in case trade goes against you (remember no system is 100% profitable).
This system is very profitable and the beauty of it is that you won’t need to be glued to your computer screen the whole day. Just a couple of minutes a day, that’s all it takes.
Happy Trading,