The pin bar is one of the most widely used price action patterns among professional traders. Its distinctive shape with a long wick and small body tells a powerful story of rejection. When you learn to identify and trade pin bars correctly, you gain access to high-probability setups with excellent risk-to-reward ratios. This comprehensive guide covers everything you need to know about pin bar trading.
What is a Pin Bar?
A pin bar (short for "Pinocchio bar") is a candlestick pattern characterized by a small body and a long wick (shadow) that extends significantly beyond the body. The pattern gets its name because, like Pinocchio's nose, the long wick represents a "lie" as the market tested a level but was rejected. The rejection creates a powerful reversal signal.
Anatomy of a Pin Bar: The wick (or tail) should be at least 2-3 times the length of the body. The body should be small and located at one end of the candle. The longer the wick relative to the body, the stronger the signal.
Types of Pin Bars
Bullish Pin Bar
A bullish pin bar has a long lower wick pointing downward:
- Small body at the upper portion of the candle
- Long lower wick showing rejection of lower prices
- Little to no upper wick
- Signals potential bullish reversal
- Most powerful after a downtrend or at support
Bullish Pin Bar Example
Stock ABC at support level of $50:
- Open: $51
- High: $52
- Low: $47 (price probed down but was rejected)
- Close: $51.50
- The $4 lower wick shows strong buying at lower prices
Bearish Pin Bar
A bearish pin bar has a long upper wick pointing upward:
- Small body at the lower portion of the candle
- Long upper wick showing rejection of higher prices
- Little to no lower wick
- Signals potential bearish reversal
- Most powerful after an uptrend or at resistance
Bearish Pin Bar Example
Stock XYZ at resistance level of $100:
- Open: $99
- High: $105 (price probed up but was rejected)
- Low: $98
- Close: $98.50
- The $6 upper wick shows strong selling at higher prices
What Makes a Valid Pin Bar
Not every candle with a wick is a pin bar. Valid pin bars must meet these criteria:
- Wick length: At least 2-3 times the body length (ideally more)
- Body position: Body at one extreme of the candle, not in the middle
- Opposite wick: Little to no wick on the opposite side
- Context: Appears at a meaningful location (support, resistance, trend)
- Size: The overall candle should be reasonably sized, not tiny
Trading Strategies for Pin Bars
Strategy 1: Classic Pin Bar Entry
The most straightforward approach for trading pin bars.
Bullish Pin Bar Trade Setup
- Bullish pin bar forms at support with $50 low, $52 close
- Entry Option 1: Buy at market on pin bar close
- Entry Option 2: Buy stop above pin bar high at $52.20
- Stop loss: Below pin bar low at $49.50
- Target: $58 (2:1 or 3:1 reward-to-risk)
Strategy 2: 50% Retracement Entry
A more advanced approach that offers better risk-to-reward:
- After pin bar forms, calculate the 50% level of the pin bar range
- Place limit order at this level for entry
- Stop loss stays below pin bar low (or above high for bearish)
- This gives you a much better entry price if price retraces
- Risk: Price may not retrace and you miss the trade
Strategy 3: Trend Continuation Pin Bars
Pin bars that form during pullbacks in a trend are highly reliable:
- Identify a clear trend (uptrend or downtrend)
- Wait for a pullback against the trend
- Look for a pin bar signaling the end of the pullback
- Enter in the trend direction when pin bar forms
- These setups have high win rates due to trend alignment
Best Locations for Pin Bars
Pin bars are most effective at specific market locations:
- Support and resistance levels: Pin bars rejecting key levels are very powerful
- Moving averages: Pin bars at 50 or 200 MA show institutional interest
- Fibonacci levels: 38.2%, 50%, and 61.8% retracements
- Trend lines: Pin bar touching and rejecting trend line
- Round numbers: Psychological levels like $100, $50, etc.
Pin Bar Psychology
Understanding why pin bars work helps you trade them with confidence:
- Price moves aggressively in one direction (creating the wick)
- Traders at that extreme get trapped
- Price reverses sharply, trapping late traders
- Trapped traders must exit, fueling the reversal move
- New traders see the rejection and join the opposite direction
Volume Confirmation
Volume adds confidence to pin bar signals:
- High volume pin bar: Strong rejection, many participants involved
- Average volume: Valid signal, standard confidence
- Low volume: Weaker signal, may need more confirmation
The ideal scenario is high volume on the pin bar, showing significant rejection and participation.
Common Pin Bar Mistakes
- Trading every pin bar: Only trade pin bars at meaningful locations
- Ignoring context: Pin bars against strong trends often fail
- Too small pin bars: Tiny pin bars are less reliable
- Body too large: If body is large relative to wick, it is not a pin bar
- Wrong stop placement: Stop must be beyond the pin bar wick
- Impatience: Wait for daily close before confirming the pattern
Pin Bars on Different Timeframes
Pin bars work across timeframes with varying reliability:
- Weekly: Most powerful, can signal major reversals lasting weeks
- Daily: Excellent for swing trading, highly reliable
- 4-hour: Good for active swing traders
- 1-hour: Usable for day trading with additional confluence
- Below 1-hour: Many false signals, requires careful filtering
Pin Bar Trading Plan
Follow this systematic approach for consistent results:
- Identify the market context (trend, range, key level)
- Wait for a pin bar to form at a significant location
- Verify the pin bar meets all criteria (wick length, body position)
- Check for volume confirmation
- Determine entry method (market, breakout, or 50% retrace)
- Calculate stop loss (beyond wick) and target (2:1 minimum)
- Size position appropriately (1-2% risk maximum)
- Execute the trade and manage according to plan
Track Your Pin Bar Trades
Pro Trader Dashboard helps you track all your price action trades. See which pin bar setups are most profitable for you, analyze your win rate by location, and improve your trading over time.
Summary
The pin bar is a cornerstone pattern of price action trading. Its long wick shows clear rejection of a price level, making it an excellent reversal signal. Focus on pin bars at significant levels, ensure the wick is at least 2-3 times the body length, and always trade with proper risk management. When combined with solid market analysis, pin bar trading can be highly profitable and consistent.
Continue your price action education with our guides on the fakey pattern and inside bar strategy.