The pin bar is known as the strongest price action signal ever existed, perhaps. For the rest of my life, if I could pick only one price action pattern to trade with, for sure I would probably pick the pin bar. Despite its simple structure, however, the pin bar can be really tricky for trade if you fail to know how to distinguish a very good pin bar from a bad one, obviously. Check Out Binary Interceptor
In fact, I see that a lot of traders who always makes the same mistakes with pin bars. In this case, they trade every pin that they have a look at, also fail to give their consideration to the market context that the pin bar formed within. And, then, they try trading counter-trend pin bars constantly and also lots of other mistakes.
So, the fact of the matter is known that there are many subtleties for trading pin bars you have to understand if having a hope to trade them successfully. Thus, without further ado, let’s see several of the biggest mistakes that traders make with as using pin bars.
- Don’t learn trading pin bars in trending markets first
In regards to pin bar trading, the first thing that I tell my students to do is to learn how to trade pin bars in trending markets. But, why? To answer this, there is a very simple reason that any price action setup or signal is tending to have a better chance for working out with the power and momentum of a market trend behind it as well.
It contains numerous reasons to explain why markets trend, still, for the exact reasons, they don’t really matter. For this case, we should fully care about that a market is (or isn’t) trending and whether we can jump aboard that trend in order to take advantage of the power of it or not. For the aim of ignoring the power as well as ‘weight’ behind a trend and then think that you will start making money trading pin bars against the trend before you’ve learned how to trade with the trend, well, is simply ignorant. In this day, to me, I still decide to look for pin bars with the trend first, and also those are as the pin bar signals I prefer as my number one option.
- Don’t learn to trade pin bars on the daily charts first
See that if fail to trade pin bars successfully on the daily chart time frames; it is clear that you won’t have enough ability to successfully trade them on any lower time frame either. About reasons, you can read here to know more. Simply, the daily chart is the best time frame for trading, and additionally I fail to believe that to be a subjective view point either, well, I see that it is really a fact of trading.
In general, you can find that the lower in time frame you go, also the lesser opportunity any given price action signal (or other signal, also) has of working out. This is seen as due to market noise or random price fluctuations that mean nothing simply. And, within this market noise, also having inevitably arises pin bar setups that may seem good to the untrained eye ones; however, they are meaningless in reality, too.
So, as we can see a pin bar that is on the daily chart time frame has a much better opportunity of being meaningful and useful, in a simple way since it’s on the daily chart in which there are less random market fluctuations. For the daily chart, it displays the most appropriate view of a market, comprising what has occurred in it, what is occurring and what might occur next. When you go down in time frame, then this view may become hazier as well as less meaningful, it as does any price action signal.
- Don’t trade pin bars with confluence – market context
We all know that a pin bar is a very strong price action signal, however, only if it happens at the right place on the chart and at the right time as well. Similar to how I teach my students in my trading courses, it is clear that typically, the best pin bar signals happens at a confluent level or area on the chart. It is essential since there are a lot of pin bars you might spot on any given price chart, still they are not really all equal, and it’s the type and amount of confluence making one pin bar to be better (or worse) than another as a result.
To me, I really like telling my students that for a good pin bar signal, it should “make sense” in the context of the current market conditions that are happening on the daily chart. Well, that can go for a 1 hour or 4 hour pin bar, too. In contrast, if it fails to “make sense” with either the trend, key chart levels or both of them, on the daily chart time frame, you can find that it’s probably not a good pin bar for you to have a trade.
- About putting your stop loss too close to entry
Let’s move on another big mistake that I see many traders making with the pin bar reversal strategy, is putting their stop losses too close to their entry. As I mentioned in my recent article, good trades often take longer to play out than we can expect, and also with that comes the fact that markets clearly fluctuate across time, it is often meaninglessly, so as you can see that you don’t want to get stopped out of a good pin bar trade prematurely just for the reason that your stop loss was too close.
Thus, for what you want to do, it is to find the most logical point on the chart that will invalidate your pin bar trade if in this case, the price moves beyond it. This point or level is often further away than most people want it to be or they think that it should be. For the difficult thing about having wider stop losses, it is that if you want to properly manage risk, well it means that you must decrease your position size down as your stop loss distance grows. Notice, this isn’t something that you should view as ‘slowing’ the progress of your trading or as a ‘hindrance’, since in the long-run it will head to more gains or profits because you will be properly trading and building proper trading habits as well.
Just check out this lesson for having an insight into how to obtain stop losses safe on pin bar trades.
- Actually, you’re not trading a pin bar
The majority of times traders think that they are trading a pin bar setup and actually it’s not even a pin bar. So, you should know that this is a mistake many people typically make from not being trained rightly on how to trade pin bars or what exactly makes a good pin bar, and should know it’s something that’s easy to fix. With the proper pin bar trading education and training, you will learn quickly about what a high-quality pin bar setup can actually look like, then, how you can identify them, and also how you can properly trade them.
For me, I trust from this lesson that you’ve learned about some of the most common mistakes traders can make as trading pin bars and some useful steps in order to make sure that you avoid them. Thus, if want to learn about all the subtleties of pin bar trading, please check out my price action trading course to get information in detail.