They didn't and aren't working so well because of the way they were created. They were created because the retracement during the downmoves and upmoves, respectively, happened at the close of the day. This made them into pin bars because they were at the top of the retracement cycle. You really need to look deeper into it before just trading off of the pin bar. I fell for this as well because I didn't take the time to look at the lower timeframes to see how and why they were formed.
Having been trading PB for a while now it is quite simple there are some that work and there are others that wont.
You try to pick the best possible PB to trade but there is no guarantee that they will work. What you do want is a statistical edge that over time grows your account.
They didn't and aren't working so well because of the way they were created. They were created because the retracement during the downmoves and upmoves, respectively, happened at the close of the day. This made them into pin bars because they were at the top of the retracement cycle. You really need to look deeper into it before just trading off of the pin bar. I fell for this as well because I didn't take the time to look at the lower time frames to see how and why they were formed.
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Mike W,
Just out of curiosity then how should a PB be formed???
Cause as is my understanding of PB's the price opens then moves away from the open then back to close around where it opened. Leaving a long nose poking out from the surrounding traffic.
Please explain what you are referencing with a couple of pics so i can further my understanding of this concept
Just out of curiosity then how should a PB be formed???
Cause as is my understanding of PB's the price opens then moves away from the open then back to close around where it opened. Leaving a long nose poking out from the surrounding traffic.
Please explain what you are referencing with a couple of pics so i can further my understanding of this concept
Enjoy
Ademac
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Ok, I will post a chart of the Usd/Chf pin that was created because of a retracement during the downtrend and as a result failed.
On the daily chart you can see the pin bar that formed during a downtrend. First things first, this was a countertrend trade, which is DUMB. Countertrend trades limit your potential for a gain while increasing your potential for a loss because your stop loss moves down along with the trend, just as yourtake profit does.
Now on the 4 hour chart you can see that the pin only formed BECAUSE the retracement happened to peak at the day's close. To understand this, you should have a good understanding of retracements of price. There is a difference between solid pin bars that should be used to trade and retracement pin bars. If you look at a solid pin bar, you can go to the lower timeframe and clearly see that it happened because the price moved to make a correction from the previous direction.
Do you understand or no? If not, ask a few questions on it and I will try to answer them as directly as possible.
Ok, I will post a chart of the Usd/Chf pin that was created because of a retracement during the downtrend and as a result failed.
On the daily chart you can see the pin bar that formed during a downtrend. First things first, this was a countertrend trade, which is DUMB. Countertrend trades limit your potential for a gain while increasing your potential for a loss because your stop loss moves down along with the trend, just as yourtake profit does.
Now on the 4 hour chart you can see that the pin only formed BECAUSE the retracement happened to peak at the day's close. To understand this, you should have a good understanding of retracements of price. There is a difference between solid pin bars that should be used to trade and retracement pin bars. If you look at a solid pin bar, you can go to the lower timeframe and clearly see that it happened because the price moved to make a correction from the previous direction.
Do you understand or no? If not, ask a few questions on it and I will try to answer them as directly as possible.
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Sorry but i still dont understand very well. are u saying that since the retracement occured at near the close if it wud have happened a lil later the pb that formed wud have only been a very bearish bar and thus not a pb?and the next bar wud have been a lil retracement bar? so the retracement on a 'good" pb shud be early in the day. if this is not what u r saying cud u explain a lil more clearly pls. thanx.
Sorry but i still dont understand very well. are u saying that since the retracement occured at near the close if it wud have happened a lil later the pb that formed wud have only been a very bearish bar and thus not a pb?and the next bar wud have been a lil retracement bar? so the retracement on a 'good" pb shud be early in the day. if this is not what u r saying cud u explain a lil more clearly pls. thanx.
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P.S. i know it was counter trend but there was also macd divergence. so it got a lil more weight.
Sorry but i still dont understand very well. are u saying that since the retracement occured at near the close if it wud have happened a lil later the pb that formed wud have only been a very bearish bar and thus not a pb?and the next bar wud have been a lil retracement bar?
so the retracement on a 'good" pb shud be early in the day. if this is not what u r saying cud u explain a lil more clearly pls. thanx.
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For the first, yes that's what I meant.
For the second part, I didn't mean that the retracement should be early in the day, I meant that it shouldn't be based off of the retracement. It should be based off of a continuation of the trend. These pin bars were formed because of the retracement, that's all. After they formed, price just continued it's normal downward movement.
A good pin bar that you should trade is in line with the trend, not against it. Countertrend trading isn't normally very profitable.
Ok, I will post a chart of the Usd/Chf pin that was created because of a retracement during the downtrend and as a result failed.
On the daily chart you can see the pin bar that formed during a downtrend. First things first, this was a countertrend trade, which is DUMB. OK i am aware of the school of thought surrounding the counter trend trading, that is why i only try it with PB's as they are a trend reversal pattern.
Countertrend trades limit your potential for a gain while increasing your potential for a loss because your stop loss moves down along with the trend, just as yourtake profit does. How my stop loss moves down i don't understand as it is below the the low of the PB and at the end of the days trading it moves up to the days low. reducing my risk this is repeated every day the trade last until it gets stopped out.
Now on the 4 hour chart you can see that the pin only formed BECAUSE the retracement happened to peak at the day's close. To understand this, you should have a good understanding of retracements of price. OK this is where it gets hazy for me. Retracement of price to what? Your charts show a Vegas like tunnel. Is this what you are referencing when you talk about retracement too.
There is a difference between solid pin bars that should be used to trade and retracement pin bars. If you look at a solid pin bar, you can go to the lower timeframe and clearly see that it happened because the price moved to make a correction from the previous direction. So i should be dropping down to the lower TF and looking for a break of a trend line or a breach of the tunnel. Would it be possible for you to post a chart showing me what it should look like at the lower TF
Do you understand or no? If not, ask a few questions on it and I will try to answer them as directly as possible.
For the second part, I didn't mean that the retracement should be early in the day, I meant that it shouldn't be based off of the retracement. It should be based off of a continuation of the trend. These pin bars were formed because of the retracement, that's all. After they formed, price just continued it's normal downward movement.
A good pin bar that you should trade is in line with the trend, not against it. Countertrend trading isn't normally very profitable.
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Thanx for explaining , i think i got it. i guess u r saying that when it is in down trend, and it retraces up and the sellers pushes it back and this way form a pin bar. this wud be a good pb. but this way wudnt it be in some traffic? btw i guess why its not working is cos dow dropped and more subprime worries and move to "quality". incidentally the pb was formed when stocks rose on black friday. i cud be wrong too.
For the second part, I didn't mean that the retracement should be early in the day, I meant that it shouldn't be based off of the retracement. It should be based off of a continuation of the trend. These pin bars were formed because of the retracement, that's all. After they formed, price just continued it's normal downward movement.
A good pin bar that you should trade is in line with the trend, not against it. Countertrend trading isn't normally very profitable.
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I think i am with you now, When you are talking retacement you are talking retacement in the current trend so you shouldn't try to take PB in a counter trend fashion as they are not very productive.
I would agree with you that some of my best PB's have been at the end of of a retacement of the overall trend.
You have given me some food for thought on how i trade PB's For now i wont change my approach but will instead keep trading them as i see them. But i will mark each trade as either Trend or counter trend, This will allow me to build up a picture over the next three months of how well each one is paying.
I suspect you will be right, but i need to build up a body of hard evidence for analysis before i make any modifications to my trading plan.
I've been looking and studing pin bars as well. Except I am looking at green candles with lower low in a downtrend and vice versa in uptrend.
I would consider the daily usd/chf a good play. Stop loss a pip or so below the daily pin bar. Also, if you wait it out some (like today) and bought when it was low, your stop is pretty close so you aren't risking as much.
Seems like the higher time frame the better. For instance the last 4hr candle on gbp/usd is one. Could sell around 2.0710 (which I should've) with stop around 2.0738. Not that they all work but you risk very little for good reward. I also thought about reversing trade if the stops are hit. Still studying and playing around for now. I did take the hourly one for 20 pips which worked.
Some that didn't work? The 30 minute and hourly eur/jpy today. Trend was down, so maybe that is good clue. The 30 minute candle and hourly candle were the same one. I didn't take the trades, but the stops would've been hit. Let's see how a reverse trade would've worked out.
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Joined May 2006
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Status: Trade Towards the 5 ema
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This Pin Bar could very well end up being in traffic... fair enough !!! That is the short way of saying what seeking has been saying all along... BUT, in this case I do not think this is a Pin Bar bouncing off the trend line... it was a PB bouncing off the support line at 1.6290... SO, now, if by some chance price does not go back down below the line by tomorrows close, this will mean we have either a TBL, or a DBLHC... yes, there is maybe a 4 pip difference in the daily bars, but in this case OK because it is bounce off the same support... in fact we almost have a 3BL if you include the PB itself...
I will be very careful here watching to see if price can get back above the trendline... if it bounces off the trend line... I will get out... because we will likely be seeing a continuation down...
Thanx for explaining , i think i got it. i guess u r saying that when it is in down trend, and it retraces up and the sellers pushes it back and this way form a pin bar. this wud be a good pb. but this way wudnt it be in some traffic? btw i guess why its not working is cos dow dropped and more subprime worries and move to "quality". incidentally the pb was formed when stocks rose on black friday. i cud be wrong too.
I think i am with you now, When you are talking retacement you are talking retacement in the current trend so you shouldn't try to take PB in a counter trend fashion as they are not very productive.
I would agree with you that some of my best PB's have been at the end of of a retacement of the overall trend.
You have given me some food for thought on how i trade PB's For now i wont change my approach but will instead keep trading them as i see them. But i will mark each trade as either Trend or counter trend, This will allow me to build up a picture over the next three months of how well each one is paying.
I suspect you will be right, but i need to build up a body of hard evidence for analysis before i make any modifications to my trading plan.
Thanks again
Ademac
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Exactly Ademac. I wish I could expell words like that. haha I was having a hard time trying to figure out the best way to explain but you just did it for me. And thank you for your patience. Pin bars that form as counter trend bars oftentimes form because of a retracement, which will only get you burned.
that line... I thought that line would be more solid resistance....
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Thanks for the response Tiki. I was only asking because I do think pin bars in those type of set-ups "In Traffic" pin bars are still good ones some times. I need to get better at playing only the real good set-ups. All part of the learning experience. Happy Trading
