Question about pin bars

I have been reading the james16 thread and have gotten some really good info from there. I am upto page 44 now. I am still a little confused about the pin bars.

Are you supposed to wait for the right eye to close before you enter the trade? The way I see it, how can you call a bar a "pin bar" unless the right "eye bar" closes?

eg: If the our pin bar is protuding down and the right eye bar has just started to form. There is a chance that the right eye bar will go lower than the pin bar. I hope you see what I mean....I wish I had pictures to explain this.

Thanks.

Good question!

A couple of times within that thread James does mention the answer to that question. The reason you may be confused is he has mentioned two methods he uses.

The conservative approach, which is still an awesome way to make pips, is to wait for a "break" of the pin.
i.e. For a bearish pin, where we are expecting price to go down, we will wait until the pin's trading range has been broken downwards by say, 5 to 10 pips (the value I'm using for daily pins), before entering the trade.
If you use this method in the right places,as taught by Jim, you'll be happy with the progress you can make to that demo account.


The second approach is to wait for the second eye to retrace a particular distance into the pin bar's range. and getting in early.
This retracement will usually be based on a Fibonacci ratio (or sometimes 50%, a non-fib value).
This approach needs a lot of practice, as you need to be good at identifying price exhaustion on intraday charts. (This exhaustion could even be another pin, but shown on a lower time frame!)
The advantage is you'll be much much closer to your stop loss point (just past the nose) and will gain even more profit when it does break. The disadvantage is the risk of the pin not breaking in your direction and going the other way, since the pin bar isn't truly confirmed until it does this.

Pin bars, more often than not, will go your way. Waiting for a break increases the probability much more.

One last thing. If using the first method and waiting for a break, your stop loss IS much further away. You need to choose your lot sizes to suit your risk management guidelines. On a weekly chart the stop loss point can be hundreds of pips from the break point to the tip of the nose!!

Pins, even though they are good, aren't guaranteed. Only take trades you are allowed to. Good pins, in good positions happen all the time. Waiting a week or so for a better one than the current dodgey one you are looking at is worth it. There may even be a better one tomorrow on another pair!

,Bundy

BTW, it's worth re-reading Jims thread a few times.
I've picked up little tips and tidbits along the way that I didn't notice because of all the information that's within it. You don't have to read every post. Just reading his chart posts alone can shed a brighter light.

Thanks for your reply. It helped.