Finding the Pin Bars

The purpose of this section is to give several examples of what a pin bar looks like. Take a look at Figure 5 and the bars that have been numbered (either below or above the bar in question). The chart shows the daily charts for the GBPUSD pair for a period from the 20th January 2006 to the 23rd February 2006. Look at the image and decide whether the numbered bars are good pin bars to trade, based on how they look and where they are. Decide which of these bars, if any, you would trade. See if your comments match those made below.

This bar has good form. The open and close are nearly equal and they are very close to one side of the bar (in this case, the bottom) and are lower than the previous eye. But the nose is not very long and it doesn’t protrude much from the prices of the previous eye and the bar before it.
The open and close are nearly equal and are quite close to one side of the bar (in this case, the high) and are also higher than the previous eye. The nose is not very long and it does not protrude much from the previous eye.
The open and close for this bar are nearly the same but they are getting quite close to the middle of the bar – it is almost a neutral bar. It is good that the open and close are above the previous eye. The nose is not very long because of this. (Note that if you played this pin on a break of the pin bar (taking a long position) there would have been no trade as prices went down on the next bar.)
The open and close are nearly the same but they are also right in the middle of the bar. It is also an inside bar (or very close to it) where the bar makes a lower high and a higher low than the previous bar – so prices are not protruding.
The open and close are near the same price and are right near one end of the bar and are lower than the previous eye. The nose is nice and long, which is good, and protrudes nicely from previous prices. This would have been a good pin to play on the break and we can see that for the next two bars if we had taken a short position there would have been good opportunity to profit from the setup.
For this bar the open and close are near one end of the bar and are higher than the eye. Note that the nose doesn’t stick out much beyond the low of the bar that has been numbered 4, so prices have not protruded much. If we look at the next bar we see that prices only go 5 pips above the high of bar number 6, so we would have not entered a long trade anyway.
The open and close are not at nearly the same level and the close is nearly half way down the bar and is not higher than the low of the previous eye! The nose does protrude from the prices, but because of the position of the close this is not a pin bar!
In contrast, the close of this bar IS within the previous eye, but it is still half way up the bar! The nose also doesn’t protrude much beyond the previous prices. Overall, this would not be a good pin bar to play.
Open and close are near one end and are enclosed by the previous eye. The nose is nice and long but fails to protrude from the surrounding prices much, so it would not be a good pin bar.
The open and close are near one end of the bar. However, the nose does not stick out. Not a pin bar.
This looks promising with open and close near one end of the bar. They are well placed compared to the first eye on the left. The nose sticks out a bit. This bar isn’t at a swing high or swing low or at confluence, though.

Which of these pin bars should a beginner play? The bars numbered 1 and 5 seem to have the best form and have the best long noses that stick out from the surrounding prices. If you are patient over this one month period two pin bars would have been played. They both would have worked well with lots of potential for profit. YES it is easy to say this in hindsight but LOOK for the good pin bar formations while you are trading and try it out. (While trading GBPUSD over this period I personally only took the pin bar labelled 5 and this was the only daily pin bar I traded on the GBPUSD for that period.)

By : Lincoln (a.k.a. lwoo034 at Forexfactory.com forums)

Next....Some final thoughts

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