First, what is a pin bar? A pin bar is a special candlestick pattern: (1) the shadow is more than twice the body; (2) there is no opposite shadow or the opposite shadow is very short; (3) if it appears at the end of a trend, it indicates a reversal.
Looking at the following chart, all belong to Pin bars. What should we do when encountering such situations? Next is the key core knowledge:
Two basic conditions:
Is it at a clearly significant level?
Is it at a clearly high or low position?
Five detail items:
Is the entire Pin bar clearly visible on the chart?
Is there a false breakout?
Is the pin bar's body insured within the highest and lowest prices of the previous candlesticks, and is the overall range of the pin bar larger than the previous one?
Is it in line with a larger trend?
Is the risk-reward ratio for entry greater than 1.5:1?
The above five details are not in order of priority. Personally, I tend to consider a false breakout that is determined to be a qualified pin bar, while some prefer to follow the trend. These do not affect our trading.
The above 7 points are the seven judgment criteria we must follow when encountering signals, which are essential! We must ensure that the requirements reach 2+2 or more before entering a trade, meaning both basic conditions must be met, and 5 detail items must meet 2 (one of which is a false breakout), then this pin bar can be a consistent winner!
