Strategy Library

Price action

Pin bar at a key level

A pin bar has a small body and a long wick: price tried a direction and was pushed back. On its own it means little. At a level that matters (support, resistance, a flipped level or a round number) it can mark where the other side stepped in.

BeginnerForex, gold, indicesAny sessionH4, D1
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Example 01

Pin bar at a key level on a chart

USDJPY · H4Pin at supportpullback, rejection

Level: 150.21Entry: 150.48Stop: 149.93Target: 151.58 (2R)Sample candles, not market data

The rules

Setup
  • Mark the levels you count as key before the candle forms
  • A pin bar: a small body with a wick at least two thirds of the candle
  • The pin bar forms at your level, its wick poking through and its body closing back on the right side
Entry
  • Either: enter at the pin bar close
  • Or: wait and enter on a break beyond the pin bar in the direction it points
Stop
  • Beyond the end of the wick
Target
  • The next opposite level, or 2R to 3R
Manage
  • Set the stop and target before entry and leave them

Common mistakes

  • Trading every pin bar. Location is the skill. A pin bar away from any level is noise.
  • Using low timeframes. Small timeframes print many pin bars that mean little.
  • Not deciding with or against the trend. Sources disagree on this; pick one and write it down.

When it's off

  • Skip pin bars in the middle of a range or a choppy market
  • Call it off if price trades through the far end of the wick

Words to know

Pin bar
A candle with a small body at one end and a long wick on the other, showing price was pushed one way and rejected. A hammer is the bullish version after a fall, a shooting star the bearish version after a rise, and it only counts once the candle has closed.
Support and resistance
Zones, not single prices, where buyers (support) or sellers (resistance) have shown up before. A level is broken when a candle closes beyond it, and a broken level is often watched from the other side.
Round numbers
Prices ending in zeros, such as 1.1000, 150.00 or 2000, that many traders watch, so orders gather there. Take-profit orders tend to sit at them and stop losses just beyond them.
Inside bar
A candle whose high and low both stay inside the previous candle's high and low (the mother bar). A body inside the previous body (a harami) is a different test.
Confluence
Several of your reasons lining up at one price.

When you make it yours, I'll ask what the rules above leave open. Start with one of these:

  • What wick size counts as a pin bar for you?
  • Which levels count as key, and how do you mark them?
  • Do you trade pin bars with the trend, against it, or both?
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What testing exists

Studies of candlestick rules on large US stocks found them not profitable on their own. That is why this strategy depends on the level, not the candle.

Before you trust a backtest

  • Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%.
  • The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test.
  • Include spread and commission, and practice on dates you have not looked at, before you trust a result.

Sources