There are many types of candles which can be distinguished. In this guide, we will look into pinbars. These candles have a characteristic shape which makes them very simple to locate on the chart. And we will show you the ways of using them during trading on the Olymp Trade platform.
Key Takeaways🔑
| →Pinbars are unique candles with a small body and long shadow that indicate market trend reversal. |
| →They can be bullish or bearish, providing signals for potential buy or sell positions. |
| →For effective pinbar trading, ensure the market is trending and wait for the pinbar to fully develop. |
Contents
Pinbars candles overview
The body of a pinbar is small. Then there is one long shadow which is a minimum of two-thirds of the total candle length. On the other side of the body, there can be a short wick or no wick at all. Pinbars candlesticks appear along with the trend and they inform us about price rejection or reversal. They are very valuable in times the market is trending.
Bullish pinbars
Pinbars can be either bullish or bearish. The first ones will have a long wick directed downwards. They form during the downtrend when the sellers push down prices, bringing about the trend of exhaustion. Then bulls come in and drive prices up. So pinbars candles are a signal of the upcoming uptrend, therefore, you have to place a buy order.
Bearish pinbars
Bearish pinbars’ long wicks point up. You will encounter them during the uptrend. The buyers are struggling to raise prices. But the sellers step in and bring prices down. Whenever you spot a bearish pinbar it might signify the trend of exhaustion and the forthcoming change to the downward trend. That is why you have to open a sell position here.
Two different approaches to trading with pinbars at Olymp Trade
Pinbars can be used for effective trading but there are two important conditions to fulfill. One is that pinbars candles have to form during the market which is trending. And the second condition is that you must not rush things. Wait for the pinbar to fully develop. The longer the shadow, the better.
Trading with the use of pinbars on the trending markets
Pinbars candlesticks form at the top of the uptrend or the bottom of the downtrend. They signal the trend of exhaustion and reversal. Thus, in the trending markets, look for pinbars candles, wait for them to fully develop, and then enter the trade in the reverse trend direction. So if you spot pinbar on the peak of the uptrend you will enter a sell position. If a pinbar will appear during the downtrend, you will enter a buy trade. Your entry should take approximately 5 minutes if you are trading on 1-minute interval candles.
👍 Pros and Cons of Trading with Pinbars 👎
Pros:
- 🔍 Pinbars are easy to identify due to their unique shape.
- 🔄 They offer valuable insights into potential market trend reversals.
- ⌛ They can be used effectively in both uptrends and downtrends.
Cons:
- 💡 Requires a good understanding of market trends for effective use.
- ⌚ The trader must be patient and wait for the pinbar to fully develop.
- 📈 It may not be as effective in a sideways or ranging market.
| Pinbar Type | When to Trade |
|---|---|
| Bullish Pinbars | These indicate potential uptrends. Traders should consider entering a buy position when a bullish pinbar is spotted during a downtrend. |
| Bearish Pinbars | These suggest potential downtrends. Traders should consider entering a sell position when a bearish pinbar is identified during an uptrend. |
Trading with the use of pinbars according to their color
We weren’t talking about the colors of pinbars till now. Well, the color does not affect the distinction between bullish and bearish pinbars. Both can be either green or orange. They are both useful for price action traders. However, what matters is the color of the next candle that follows the pinbar. If there is a bullish pinbar along with the trend, it is very likely the next candle will be of green color. And if a bearish pinbar is formed, you can expect the following candle to be orange. To summarize, when a pinbar is followed by a green candle, you ought to place a buy order. If it is followed by an orange one, you just open a sell position. After you have become familiar with pinbars types and different ways of trading with them, go to the Olymp Trade demo account for a little bit of practice. See if you are satisfied with the results and tell us all about it. Wish you success!
💡 Q&A
- What are pinbars in trading?
- Pinbars are a type of candlestick pattern that indicate possible market reversals. They have a small body with a long shadow, often signaling that the market trend might change.
- How can you identify a bullish pinbar?
- A bullish pinbar typically has a long lower wick, with the shadow pointing downwards. This is seen during a downtrend, suggesting a potential shift to an uptrend.
- What does a bearish pinbar signify?
- A bearish pinbar is characterized by a long upper wick with the shadow pointing upwards. It forms during an uptrend, indicating a possible switch to a downtrend.
- When should I trade using pinbars?
- For effective pinbar trading, it’s crucial to ensure the market is trending and wait for the pinbar to fully develop before entering a trade.
- Can pinbars be used in a sideways or ranging market?
- While pinbars can be spotted in any market condition, they tend to be most effective when used in a trending market, where they can indicate potential trend reversals.