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.

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
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • Tune in to @IlyaSpivak 's #webinar at 10:00 PM ET/3:00 AM GMT for insight on the cross-market outlook in the week ahead. Register here: https://t.co/E213bTtq5C https://t.co/Sj2NSgZ4xD
  • Central banks often deem it necessary to intervene in the foreign exchange market to protect the value of their national currency. Learn how central bank intervention can impact your trading here: https://t.co/8G8mUX4so6 https://t.co/MAn2EL32sU
  • In the week ahead, around 25% of S&P 500 companies will release their results, including GE, Johnson & Johnson, 3M, Microsoft, Boeing, AT&T, Facebook, Apple, Tesla, Visa and Amazon. Read more on my earnings outlook report. https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/01/17/Dow-Nasdaq-SP-500-Outlook-Earnings-May-Bring-Positive-Surprises.html
  • Wall Street Futures Update: Dow Jones (+0.20%) S&P 500 (+0.28%) Nasdaq 100 (+0.51%) [delayed] -BBG
  • Nearly 80% of the S&P 500 constituents closed in the red on Friday, dragged by materials (-0.43%), financials (-0.38%) and energy (-0.34%) whereas defensive utilities (+0.20%), real estate (+0.15%) and communication services (+0.02%) outperformed. https://t.co/vf08Fhfvxd
  • Traders focus a lot of their energy on spotting the perfect time to enter a trade. While this is important, it is ultimately where traders choose to exit trades that will determine success. Learn about the three types of trading exit strategies here: https://t.co/muYkTNXH7s https://t.co/fSRW0Z8mNQ
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDe1Ksp https://t.co/RyMqsHehsY
  • RT @GunjanJS: This is pretty wild. Last year, in RECORD year for options, about 30 million contracts traded daily. This year, it’s been mo…
  • Implementing a trading checklist is a vital part of the trading process because it helps traders to stay disciplined, stick to the trading plan, and builds confidence. Learn how to stick to the plan, stay disciplined, and use a checklist here: https://t.co/SQUCCZ9dzS https://t.co/KD6mfkiCaW
  • What are some technical and fundamental factors affecting the equities market? Get your free forecast here: https://t.co/YQG1aaIT8C #DailyFXGuides https://t.co/TEoSjMpMBo
How to Trade Fake Pin Bars

How to Trade Fake Pin Bars

James Stanley, 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?

Forex for Beginners
Forex for Beginners
Recommended by James Stanley
Find out how to combine pin bars with a forex strategy
Get My Guide

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