how to trade

How To Trade Pin Bars Or Hammer Candles.

Rob Taylor

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.

pin bar breakout trade

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.

pin bar retrace tradeNow 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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Forex Candlestick Patterns. How To Trade Outside Bars.

Rob Taylor

What is an outside bar?

how to trade outside barsAnother very common and successful candlestick pattern is an outside bar, or engulfing bar as they are sometimes called, because they engulf the previous candle. Knowing how to trade outside bars will put plenty of pips in your trading account. Outside bar candlestick patterns are far more reliable trading signals than inside bar patterns are. If you know how to trade inside bars then trading outside bars is very much the same.

The picture on the right shows a bearish outside bar candlestick pattern. Here you can see that the bearish red candle is completely outside the bullish green candle. The red candle completely engulfs it, hence the term engulfing bar.

Why are outside bars more reliable than inside bars?

Outside bars represent a total shift in sentiment (in this case from bullish to bearish). The bearish price action in the red candle is far greater than the bullish green candle, so we have had a total shift in sentiment from bullish to bearish. The red candle is twice the size of the green candle which indicates strong selling pressure.

If you compare the outside bar price action to the price action of an inside bar, where the candle is a lot smaller than the preceding mother candle, you can understand that a bigger candle means a bigger shift in sentiment, which equals a more reliable trade, and that is why outside bars are more reliable candlestick patterns than inside bars are.

How to trade outside bars.

The general rules on how to trade outside bars would be to enter the trade at the breakout of the red outside bar. Some traders prefer to see a retrace of the outside bar before taking the trade. The only problem with taking the trade on a retrace of the outside bar, is you may not get a breakout, you may get another inside bar instead, and then the trade becomes a lot less reliable.

My advice would be similar to the advice i gave on how to trade inside bars, which is wait for the breakout, and then look for the retrace, before entering.

For more information on how to trade outside bars please consider my Forex training course.

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Forex Candlestick Patterns. How To Trade Inside Bars.

Rob Taylor

How to trade inside bars.

Of the numerous price action Forex candlestick patterns that present themselves on a daily basis, inside bars are probably seen more often than any other pattern. Knowing how to trade inside bars will give you an edge in your Forex trading.

So what is an inside bar?

price action inside barsIts a pretty simple answer. An inside bar is a candle that forms inside another candle. If you look at the picture on the right you will see an example of a bullish inside bar. For a candle to qualify as an inside bar, it has to be inside the candle to its left, as per the picture. The red candle to the left of the green inside bar is commonly called the mother candle.

If the green candle was to the left of the mother candle it would not qualify as an inside bar. An inside bar has to be to the right of the mother candle. A mother candle that has an inside candle to its left is called an outside bar. An outside bar is a totally different candlestick pattern to an inside bar, and has a totally different meaning. You can find information here on how to trade outside bars.

So what does an inside bar signify?

An inside bar can mean one of 2 things primarily. In a trending market it can mean a reversal is likely, or it can mean a trend continuation is likely. The concept behind an inside bar is the market is showing indecision or consolidation after a big move. The red candle is a big move down and sentiment has changed from bearish to bullish. This could be a temporary change in sentiment, which would result in a trend continuation, or the start of an overall change in sentiment, which would lead to a reversal.

The candles preceding the inside bar are a good indication of whether a trend continuation or reversal is likely. Also the level at which the inside bar presents itself is also a good indication of what the likely outcome will be.

Trading guidelines for inside bars.

The general rule on how to trade inside bars would be to enter the trade at the breakout of the red mother candle. If you are trading the reversal, you would trade the breakout of the mother candle to the upside in this instance. If you were trading a trend continuation move, you would trade the breakout to the downside.

I don’t generally trade breakouts, but if i was trading this set up i would personally like to see a convincing breakout of the mother candle, and then a retest of the inside bar before i would take the trade. I like to enter my trades at the best possible price, and when you are trading breakouts you do often see a little retrace, or re test of the breakout area, before a continuation, and that is where i would like to get in, as you are getting a discount to the price paid by the breakout traders. This strategy does run the risk of missing the breakout though, as the price does not always come back for the re test.

For more information on how to trade inside bars please consider my price action Forex training course.

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