Trading Pin Bars? — ExploitByte
Trading Pin Bars? — Confluence happens when many technical indicators generate the same signal, this trading concept is used by price action traders to filter their entry points and spot high probability signals in the market.
It doesn’t matter if you are beginner or advanced trader, trading with confluence is a must, because it will help you focus on quality setups rather than quantity, and it will enhance tremendously your trading performance.
Confluence means combination or conjunction, it is a situation in which two or more things join or come together, for example, if we are looking for a pin bar signal, we need to find other factors of confluence to confirm our entry; we are not going to take any pin bar that we find on our chart.
The trend: it is one of the most important factor of confluence, this is the first thing that most successful traders look for on their charts, you can’t trade any setup without identifying if it is in line with the direction of the market or not.
A bearish pin bar in a downtrend is more powerful signal than the one in a range-bound market.
Support and resistance levels and supply and demand areas: these major levels have a significant importance in the market, because all big participants watch these specific areas.
Moving averages: i personally use the 8 and 21 moving average, this technical trading tool acts as dynamic support and resistance, and it is a very important factor of confluence in trending markets.
Trend lines: drawing these lines on your charts give us an idea about the market direction and help us find the most important reversal points in the market.
When you are analyzing your chart, you are not obligated to find all these levels to determine whether the trade is valid or not.
If you can find just one or two factors of confluence that come up together with a good pin bar setup, this is quite enough to make a profitable trade.
In the example above, we have a high probability setup with four factors of confluence.
1- The Trend: the market is trading up which means that we have to follow the trend and look for a buying opportunity.
2-The level: The support level is an important key level in the market.as you can see, price broke out of the resistance level that
becomes support and pulled back to it.
3-The signal: The formation of the bullish pin bar after the retracement back to the resistance level that becomes support.
4-Another signal: The rejection of the pin bar from the support level, and the 21 moving average that acted as a dynamic support level.
All these factors work together to give us powerful trading signal to buy the market.
See another example:
The example below shows 4 confluent levels that indicate a powerful trading signal, the first factor is the bullish trend, and the second one is the resistance level that becomes support.
The third one is the 21-moving average that acts as a dynamic support level. and the last factor is the pin bar formation near these levels in line with the bullish trend.
If you adopt this trading concept, you will completely change the way you perceive the market, and you will start trading like a sniper by waiting for the best trading setups to come to you, instead of trying hard to make trades happen.
Pin Bars Trades Examples
I will give you some trading examples to help you understand how to trade the pin bar candlestick pattern with the trend. and how to use the confluence concept to confirm your entries.
See the chart below:
The formation of the pin bar near the resistance level indicates that the retracement move is over, and the beginning of an impulsive move is likely to happen.
When we put the 21 moving average and the Fibonacci retracement on the chart, we see that the pin bar is rejected from these levels which indicates that this level is very important and sellers are willing to push the market lower.
Here in this example we have solid reasons to sell the market, the first reason is the downtrend.
The second reason is the formation of the pin bar near the resistance level which indicates the end of the pullback and the beginning of a new move downward.
The third reason is the rejection of the pin bar from the resistance level, and from the 21-moving average,
The last reason is the pin bar rejection from the 50% Fibonacci retracement level which is considered to be one of the most powerful key levels in the market.
Look at the chart below to see what happened next:
As you can see in the chart above, our analysis was right, because it was based on solid reasons to enter the market.
This is the method that i want you to learn to be able to trade the market successfully. Look at another chart below:
The chart above shows two important buying opportunities.
The market was trending up, the formation of the first pin bar after the retracement back to the support level was a high probability entry.
What confirms our entry is the rejection from the 21-moving average, and the 50% Fibonacci retracement.
The same thing happens with the second pin bar that allowed us to enter the market again and make more profits.
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Originally published at https://exploitbyte.com on June 5, 2022.