News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Crude and Brent oil are on track to extend higher as Gulf Coast supply disruptions and a positive OPEC report bolster sentiment. Uranium is on a massive surge, aided by the famous Wall Street Bets group. Get your market update from @FxWestwater here:https://t.co/XrpV0jcy8e https://t.co/m6XH4n43UQ
  • The Australian Dollar has retraced from August lows when looking at AUD/JPY and AUD/CAD. However, the AUD/NZD downtrend is intact, will a reversal there appear as well? Find out: https://t.co/8LmgqLLGJO https://t.co/yy64N01p2b
  • PBOC injects net 90 billion Yuan in open market operations - Yuan reference rate set at 6.4526 per USD - BBG
  • Australia to trial home quarantine for arrivals who are vaccinated - BBG
  • The S&P 500, Dow Jones and DAX 30 could be at risk of falling as retail traders continue increasing their upside exposure in these indices. What are the key technical levels to watch for? Find out from @ddubrovskyFX here:https://t.co/OJByiwIppr https://t.co/moWS7rqAQG
  • RT @FxWestwater: New Zealand Dollar Outlook: $NZDUSD Drops on US Dollar Bids, Wall Street Losses Link: https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/asia_am_briefing/2021/09/16/New-Zealand-Dollar-Outlook-NZDUSD-Drops-on-US-Dollar-Bids-Wall-Street-Losses.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https://t.c…
  • The US Dollar continues to hold its ground against most ASEAN currencies as recent downtrends lose momentum. What is the road ahead for USD/SGD, USD/THB, USD/PHP and USD/IDR? Find out from @ddubrovskyFX here:https://t.co/UcleaZEAaW https://t.co/dRD22S792t
  • 🇳🇿 Business NZ PMI (AUG) Actual: 40.1 Previous: 62.6 https://www.dailyfx.com/economic-calendar#2021-09-16
  • The Canadian Dollar has been caught in broad ranges against the Euro and the US Dollar, but can the upside bias in USD/CAD and EUR/CAD prolong? Find out here:https://t.co/8DubboXsjv https://t.co/SQAz8sCpmv
  • RT @BrendanFaganFx: Bitcoin Outlook: Crypto Adoption to Become Widespread in Wake of El Salvador, AMC? #Bitcoin #Ethereum $AMC $BTCUSD $ET…
How to Trade Fake Pin Bars

How to Trade Fake Pin Bars

James Stanley, Senior Strategist

One of the more compelling entry triggers via price action is the Pin Bar.

Pin Bar, which is short for ‘Pinocchio Bar,’ is a single candlestick setup that clues price action traders into potential reversals in the market. A pin bar is an elongated wick that ‘sticks out’ from price action. Traders will usually look for one-sided wicks that are two times the size of the candlesticks body.

When traders see elongated wicks sticking out from price action, they can look for the momentum that created the long wick to continue by looking for a reversal.

So if a trader sees a long wick sticking out below price action; they can look to go long. If a trader sees a long wick sticking out above price action, they may want to look to go short.

How to Trade Fake Pin Bars

Much like Pinocchio’s nose – the elongated wick of a pin bar can tell us that a lie is being told.

But not all long wicks are created equal. As a matter of fact, many of these long wicks will not be Pin Bars at all; but that does not mean that they can’t be used by Price Action traders. This article will walk through how to trade ‘fake’ Pin Bars, or long wicks that do not stick out from price action.

What separates a Pin Bar from a Fake Pin Bar?

The difference between a Pin Bar and a Fake Pin Bar is determined by recent price action.

If the long wick sticks out from recent prices, that is a Pin Bar. This is the ‘lie’ that the market may be telling us: That a movement to a previously untested level has brought a new group of buyers (or sellers in the case of a bearish Pin Bar).

If the long wick does not stick out from previous price action; they are not a genuine Pin Bar, but rather ‘Fake Pin Bars.’ The picture below will illustrate with further detail:

How to Trade Fake Pin Bars

As you can see above picture, the fake pin bar doesn’t quite stick out from previous and recent price action.

With a genuine pin bar leaving a long wick above the candle, traders could look to open a short position to take part in the momentum that created the long wick in the first place.

However, as you can see from the above setup – that would not have worked out too well.

Trading Fake Pin Bars requires additional analysis, as the signal of a short-term reversal in prices may not be as consistent as that of a genuine pin bar.

How to Trade Fake Pin Bars

The first thing we want to get comfortable with when looking for Pin Bars, or Fake Pin Bars, is what it is that we are looking to take part in by trading that setup. Let’s take a closer look at a legitimate Pin Bar below:

How to Trade Fake Pin Bars

From the above graphic, we can see what makes the pin bar attractive is the fact that price has reversed enough to leave a long wick exposed underneath price action (all taking place during the pin bar candle).

But what if a long wick isn’t sitting outside of recent price action?

This might mean that the potential for a reversal on fake pin bars could be smaller than that of genuine pin bars. But that doesn’t mean that price action traders can’t use this information to our advantage – we merely have to qualify which fake pin bars might be favorable and which are not.

We can do this by looking at the trend of the currency pair, and attempting to enter ONLY in the direction of the longer term trend. Traders can even use price action analysis to qualify and analyze trends, much like we looked at in our Introduction to Price Action.

To do this, we would want to scroll out on our charts and analyze more previous prices than if we are trading a genuine pin bar; and the reason for this is so that we can get a better assessment of the long-term trend and look to only trade in that direction. The picture below will illustrate an up-trend with a bullish fake pin bar.

How to Trade Fake Pin Bars

From the above graphic, we can see that after price had established an up-trend by creating a series of higher highs, and higher lows a fast price movement to the downside was corrected before the candle had completed (leaving the long wick circled above).

Traders can look to trade this fake pin bar by going long after this candle has formed, placing a stop slightly below the low of the fake pin bar wick. That way, if price happens to reverse against us (and move down while we are in a long position), we can exit the position if a lower price is printed below the bottom of the fake pin bar wick (picture illustrating further is below):

How to Trade Fake Pin Bars

Next: Price Action Swings (35 of 47)

Previous: Price Action Pin Bars

--- Written by James B. Stanley

You can follow James on Twitter @JStanleyFX.

Trading Double-Spikes (Price Action)

Trading Price Action - Triangles

How to Analyze and Trade Ranges with Price Action

How to Identify Positive Risk-Reward Ratios with Price Action

Trading Trends by Trailing Stops with Price Swings

How to Trade the Parity Channel with USDCAD

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES