Various trading techniques can be used by traders. Price action is one of them and there are many strategies built around it. Today I will show you a powerful method that combines different price bars. One is called a pin bar and the other one is an inside bar.
Key Takeaways🔑
| →The pin bar and inside bar combo strategy is a powerful method for trading price action. |
| →The pin bar signifies price rejection and possible reversal, while the inside bar indicates price consolidation and a probable breakout. |
| →The strategy can be applied to different support/resistance levels and offers trading opportunities in both trending and ranging markets. |
Contents
Pin bar and inside bar combo strategies
A pin bar is a candlestick with a long shadow on one side. On the other side may be a short one or no wick at all. Its shape reminds of a pin thus the name. When it appears on the price chart, it signifies rejection of the price level and possible reversal.
An inside bar is a candlestick that is completely engulfed within the previous candle. It provides information about price consolidation and a probable breakout.
Combinations of these two offer wonderful trading opportunities. The first case we will discuss is the pin bar and inside bar combo pattern. The second is the inside-pin bar combo pattern.
The pin bar – inside bar combo strategy
In this pattern, the inside bar is located within the previous candle, which is the pin bar.
Your task is to observe the chart and spot a pin bar. Then, you should wait for the next candle to develop and check where it is situated. If the next bar is consumed by the pin bar, you have got the pin bar – inside bar pattern. The best situation is when the inside bar falls within the body of the pin bar.
Another thing you need to use in this strategy is support/resistance level. Let’s see it in the example. Below, you will find a chart with visible upwards price movement. Then, you can notice a pullback to the support line. Here a pin bar has formed and now all you have to do is to observe the next candle. If it is an inside candle or preceding pin bar body is inside that candle, you can open a position for the price increase. When using a chart period of 5 minutes, you can hold the position open for around 30 minutes.
Here is another example with the resistance level marked. The price touches it and a pin bar develops. Then, you can spot an inside bar. This is our pattern so you should open a short transaction and keep it for at least 30 minutes (with the 5-minutes candles).
The inside-pin bar combo pattern
Here, the difference is that the inside bar is at the same time a pin bar which is engulfed by another pin bar. This is a continuation pattern.
Underneath, there is an exemplary GBPUSD chart with a clear uptrend. Observe the candlesticks and wait for the pin bar to appear. If the next candle forms within it and is also a pin bar, this is the inside-pin bar combo pattern and you should enter a long trade. Similarly, when using 5 minutes period candles, your position may last 30 minutes.
In the case you spot the inside-pin bar combo pattern during the downtrend in the market, you should open a position for the price decrease as the pattern tells us about the trend continuation. Enter just after the pattern and keep the position open for around 30 minutes (with the 5-minutes candles).
Pros and Cons of the Pin Bar and Inside Bar Combo Strategy 😃😔
Pros:
- Effective for trading price action and capturing trend reversals
- Offers clear entry and exit signals based on candlestick patterns
- Can be used in various market conditions and timeframes
Cons:
- Requires knowledge and experience in identifying pin bars and inside bars
- False signals can occur, requiring confirmation from other indicators or analysis
- Requires active monitoring and timely execution of trades
| Step | Action |
|---|---|
| Step 1 | Observe the price chart and identify a pin bar with a long shadow on one side and a short or no wick on the other side. |
| Step 2 | Wait for the next candle to develop and check if it is an inside bar completely engulfed within the previous candle. |
| Step 3 | If the inside bar is within the pin bar, enter a trade based on the pattern. |
| Step 4 | Set your stop-loss and take-profit levels based on your risk tolerance and trading strategy. |
| Step 5 | Monitor the trade and adjust your exit strategy if necessary. |
Final thoughts
Today’s strategy is based on price action. So observe the chart and search for the pin bars. Then check what is the next bar, whether it is an inside bar or it is an inside bar and the pin bar at the same time. Enter the trade exactly after the appearance of the pattern.
The pin bar – inside bar strategy works with the support and resistance levels on which the price reverses.
The inside-pin bar combo pattern exists in trending markets and suggests a continuation of the trend.
Go to the Olymp Trade demo account now and learn to spot candlestick patterns. Look for the pin bars and inside bars after them. Open Fixed Time trades and see the results.
Best of luck!
Frequently Asked Questions about the Pin Bar and Inside Bar Combo Strategy 🧐
- Q: What is the pin bar and inside bar combo strategy?
- A: The pin bar and inside bar combo strategy is a trading method that combines the pin bar, which signifies price rejection, and the inside bar, which indicates price consolidation and a potential breakout.
- Q: How do I identify a pin bar and an inside bar?
- A: A pin bar has a long shadow on one side and a short or no wick on the other side. An inside bar is completely engulfed within the previous candle.
- Q: What are the advantages of using the pin bar and inside bar combo strategy?
- A: The strategy offers clear entry and exit signals based on candlestick patterns, can be applied to different market conditions and timeframes, and helps traders capture trend reversals.
- Q: Are there any drawbacks to using this strategy?
- A: False signals can occur, so confirmation from other indicators or analysis is recommended. Additionally, the strategy requires knowledge and experience in identifying pin bars and inside bars.
- Q: Can I use the pin bar and inside bar combo strategy in any market?
- A: Yes, the strategy can be used in various markets, including forex, stocks, and commodities. It is adaptable to different instruments and timeframes.