How to trade pin bars or hammer candles as they are also called. Pin bars or hammers can be traded successfully on any time frame, but they tend to be more reliable on higher time frame charts, such as 4 hour and daily charts. Pin bar reversal candles are great price action set ups when traded correctly.
I personally don’t take trades based solely on pin bars or hammer candles, as my trading style is based on other factors, but lots of traders do trade them, and they do make up a large part of price action Forex trading.
I do however take notice of when pin bar set ups present themselves, as it gives me extra confirmation that i am in the correct trade, and it also helps me define a logical exit for my trades.
How to trade pin bars or hammer candles.
There are 2 possible entries when trading pin bars or hammer set ups. You can take a breakout entry trade, or you can take a retrace entry trade.
The chart on the right shows how to trade a pin bar breakout entry trade. You enter the trade on the breakout of the low, or the nose as its sometimes called.
The low (nose) is marked by the line, and as soon as the low is broken you will enter the trade short.
Now lets look at a how to take a retrace entry trade. A retrace entry trade is when you enter the trade on a retrace of the pin bar.
The most common retrace that Forex traders take is the 50% retrace.
If you measure the height of the pin bar, pin to pin, and divide it by 2 you will get your 50% retrace entry target.
You enter the trade short, when the price moves up 50% of the height of the pin bar, as shown by the chart on the right. The line marks the 50% retrace entry point.
Both of these trades show short set ups, but both can be applied to long set ups too. The candles are just inverted for a long set up.
It is important to know how to trade pin bars or hammer candles, as a lot of traders do trade them, and they do work very well if they present themselves at the correct point on the chart.
This is just basic price action trading. What i trade and teach is high probability price action trading. If you wish to learn this type of trading please consider my Forex training course.
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