The support and resistance levels are of great importance to the technical analysis during trading. But they won’t tell you much when using it alone. You need to put them together with another indicator or simply with a certain candle type. They can work very well with pinbars. And this is the subject of this guide. I would like to show you how to trade the trend reversals with the support/resistance levels in combination with pinbars.
Key Takeaways🔑
| →Support and resistance levels are important technical analysis tools for trading, but they work best when used in conjunction with other indicators. |
| →Pinbars, with their distinct long wicks and small bodies, are a valuable candle type to help identify potential trend reversals. |
| →Combining pinbars with support and resistance levels can enhance your trading strategy. |
Contents
Pinbars candles overview
There are many types of candles. One of them is a pinbar. Its body is very small and the wick on one side very long. Usually twice as long as the body. On the other end, there might be a small wick or no wick at all. When a long shadow is pointed down, they can be called the bullish pinbars. When the shadow is directed upwards, these are the bearish candles.
The pinbar’s value in trading
The development of the pinbar indicates a strong fight between bulls and bears. In the times of the uptrend, you may have encountered the bearish pinbar. The closing price is far away from the end of the wick and you can expect the trend to reverse. If there was a downtrend and a bullish pinbar developed there is a chance for an uptrend to begin.
The support/resistance levels overview
The price seems to fluctuate within a certain range. When it goes down, reaches the level, and bounces back this will mark the support level. When the price rises, then stop and returns, we can talk about the resistance. Sooner or later, these levels will be, however, broken. To know more about them, read our guide about trading support/resistance levels.
How to use pinbars with the support/resistance levels
So the price fluctuates within a certain range and it is not easy to tell when it will go beyond, using only the support/resistance. But when we add the pinbars, it will become a simple task.
Look at the picture above. When the price is nearing the support or resistance level, it can either break it or reverse. The appearance of the pinbar is a clear sign that the bulls or bears stepped into the battle and they stopped the price from moving in the previous direction. Thus, the price reverses. Be aware, however, of a false breakout.
Just follow a few rules while trading with the use of the pinbars and the support/resistance levels
- Enter a long trade when the price hits the support level and you see a bullish pinbar.
- Enter a short trade when the price reaches the resistance level and you notice a bearish pinbar is forming.
- Enter the trades for at least 10 minutes if you are using 5-minute interval candles.
Pros and Cons 📊
- Pros:
- Combining pinbars with support and resistance levels can enhance the accuracy of identifying potential trend reversals. 🎯
- Applicable across different asset classes and timeframes. ⏱️
- Helps traders identify and manage risk effectively. 🛡️
- Cons:
- Possible false signals, especially during periods of high market volatility. ❗
- Requires a good understanding of price action and candlestick patterns. 📚
- Not failproof; always requires proper risk management. ⚠️
| Pinbars | Support/Resistance Levels |
|---|---|
| Indicates strong market reversal sentiments. | Indicates levels where price has historically bounced back or reversed direction. |
| Can be used for both bullish and bearish market conditions. | Used to identify potential buy (support) and sell (resistance) areas. |
| Requires experience to interpret correctly. | Can sometimes be broken, leading to false signals. |
Using the pinbars alongside the support/resistance levels on the Olymp Trade platform
Take a look at the chart below. The price was going up and down until it reaches the resistance level. The first time there was no pinbar. But the second time a bearish pinbar developed on the resistance level. This is a sign to sell.
In the picture below you can first notice a bullish pinbar on the support level. You should enter a long position here (1). There is also visible the second possibility to enter the trade, this time in the form of a bearish pinbar on the resistance level. Open a sell position here.
These are some basic rules you should know if you are interested in trading with the pinbars alongside the support/resistance levels. Try this method on the Olymp Trade demo account first. If dealing with real balance, always remember that this strategy doesn’t eliminate the risks of the market. Always be prepared to deal with losses.
I would love to hear from you. There is a special comments section below.
All the best!
Q&A Section 📝
- Q: What are pinbars and how are they used in trading?
A: Pinbars are a type of candlestick pattern that signal potential trend reversals. They have small bodies and long wicks, indicating a strong fight between bulls and bears. - Q: How do support and resistance levels help in trading?
A: Support and resistance levels are price points where the price has historically bounced back or reversed direction. They help traders identify potential buy (support) and sell (resistance) areas. - Q: How can I use pinbars and support/resistance levels together?
A: When the price nears a support or resistance level, the appearance of a pinbar can signal a potential trend reversal. This combined strategy can enhance the accuracy of your trades. - Q: Can these techniques be used on any asset or timeframe?
A: Yes, pinbars and support/resistance levels can be applied across different asset classes and timeframes. However, their effectiveness might vary based on the market context. - Q: Are these techniques foolproof?
A: No trading strategy is foolproof, and this includes using pinbars and support/resistance levels. They can sometimes give false signals, especially during periods of high market volatility. Therefore, proper risk management is always necessary.