In the financial world, there are special candles called pinbars. Their main feature is having a very small body and a long shadow on one side. On the other end, there can be no shadow or a very short one. The long shadow may point downwards or upwards and the pinbar will be called bullish or bearish accordingly.
Pinbars significance in trading
Pinbars are a sign of a change in the market direction. If you notice the pinbar pattern during the downtrend and the wick is pointing down, it indicates the upcoming uptrend.
When the pinbar with a long wick pointed upwards appears during the uptrend, you may expect the prices to go down.
Perfect pinbar candle
There are distinguished ideal candles among pinbars. There are two conditions for a pinbar to be called perfect candle.
- The opening and closing of the pinbar are situated close to the previous candle top or its bottom.
- Both, the opening and closing of the pinbar fall within the previous candle. That area is known as the left eye.
The ideal pinbar’s presence is believed to be a strong indication to enter an option position.
If you are interested in further reading about pinbars, I invite you to see the article about using pinbars along with support/resistance or the one that will teach you how to combine pinbars with the Bollinger Bands indicator.
All the best!
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