Major Mistakes That New Traders Make With Pin Bar Trading
As a trader, once you have learned and perfected under which circumstances you should be trading as well as know the pin bars you should avoid and not trade, you will realize that the pin bar setup offers an exceptionally high probability trading signal. But until then you are bound to make some mistakes along the way.
There are three major common problems that traders face with pin bars which are:
- Trading pin bars from the wrong areas on the chart
- Trading bin bars that do not meet the Pin Bar’s basic criteria
- Pin bars have no room to move and are not sticking out or away from all other price
Here are some of the big mistakes that get rookie traders in trouble and how to counter them.
Trading pin bars from the incorrect areas of the chart
This is perhaps the most misunderstood as well as most common mistake traders make with pin bar trading. It not only gets a lot of traders in trouble but also costs them the most losing trades. Therefore, if you don’t fully understand this, you might continue struggling with pin bar trading until you have a complete understanding of it.
The pin bar ought to be used ONLY for price reversal because it is a reversal signal. The primary reason why traders are getting themselves in all types of problems over and again is that they try to use the pin bar as a continuation signal which is something that it’s not.
Foreign exchange is just like any business in life; if you want to make money, you must buy low and sell high or instead purchase cheap and sell expensive. The same is applicable on the charts with Forex pairs such as the pin bar chart.
Trading pin bars when they do not meet the basic criteria of a pin bar
The requirements pin bars have to meet are pretty simple. However, new traders trade on what they assume to be pin bars because they are not aware of what the right criteria of a pin bar are. Lack of this basic knowledge not only gets them into major trouble but also puts them in an awkward position in regards to the price action story.
Here are the basic requirements a pin bar should have before you start trading:
- Candlewick with a minimum of 3 times the length of the candle body
- Open and close within the previous candle
- A long nose protruding from all the other candles
These rules are clear-cut and cannot be avoided. Pin bars either meet the criteria or they don’t. There are no butts or ifs, and this is precisely what you need to know if you want to succeed in pin bar trading. It is crucial that you get a clearly defined method of trading, one which you can go with into the market. This will help you determine whether a pin bar is or is not a signal that meets your trading criteria.
The pin bars have no room to move and are not sticking out or away from all other price
The best pin bars are not hidden away or back in traffic. Therefore, they stick out and away from all other price. The mistake rookie traders make is finding the smallest pin bars to trade since they assume that these will give them the smallest stop as well as the biggest risk-reward.
However, this assumption fails to acknowledge that the bigger the pin bar and the bigger the rejection is, the more powerful the signal. Therefore, be on the lookout for the large and more obvious pin bars.
If you are thinking of trading the pin bar, remember that it can be both powerful and reliable price action trading signal if you can learn the basic trading criteria and avoid the mentioned mistakes. Visit https://sec.rakuten.com.au/ for more information.