Today we’re trading the pin bar/inside bar combination. No, this is not a tutorial on preparing a subway sandwich. I’m talking about trading two popular trading setups, the pin bar and inside bar, all at the same time. We’ve discussed these two patterns separately, so they shouldn’t sound like gibrish to you at all.
The pin bar and inside bar combination patterns represent some of the most powerful price signals you can ever imagine. These two patterns can send you to prosperity heaven, if you identify and trade them properly of course.There are two sets of combinations that we’ll be looking at – namely, the pin bar/inside bar combo and the inside bar/pin bar combo. We’ll then do what we’ve always done: We’ll define what these two combinations are, take a look at a few examples,and then figure out how to trade these two combination setups.
In case, some of you have forgotten what these two trade setups are about, let me give you a little reminder. the pin bar is a price action strategy that exhibits rejection and lets everybody know that a sharp U-Turn or reversal is around the corner.(If you want to know more about Pin Bar Trading Strategy, read up on my post, Pin Bar Strategy – How To Trade It ). The inside bar, on the other hand, shows consolidation. This lets everybody know that a breakout is on the horizon. And if you want to know more about the Inside Bar, take a look at my post, Trading The Inside Bar.
I guess the first thing on the list is:
What is the Pin Bar/Inside Bar Combination?
The pin bar/inside bar combination forms when the pin bar is immediately followed by the insidebar. This phenomena occurs towards the nose of the pin, or the pin bar’s real body.
At first glance, you’d think the pin bar is feasting on the inside bar in the manner it just towers over the inside bar. It’s not humongous big; it’s just that the tail(or wick)makes it look that way. It’s almost as if it’s walking on stilts.
Now let’s find out
What The Inside Bar/Pin Bar Combination Is All About?
the inside bar/pin bar combination is just simply an inside bar followed by a pin bar. In this set up, the pin bar is within range of the of the outside bar affectionately known as the other bar.. The inside bar gets it motherly name from its fuller size compared to the smaller thinner pin bar. You could be forgiven for envisaging a mother hen looking after its newborn chick.
Let’s take a look at illustrations of these two candlestick combinations
The first set up to the left is the pin bar/inside bar combination pattern. As you can see,the bearish pin bar towers over the bullish inside bar – thanks to its long tail. We see the reverse in the inside bar/pin bar setup. Here we have the pin bar inside an inside bar. Plus this setup is forming in a bullish trend,and it can only mean one thing – GO LONG.
Now that we’ve gotten the formalities out of the way:
How Do We Trade Pin Bar/Inside Bar Combination?
First,look out for the pin bar. Your point of reference is a candle with a long skinny wick pointing upwards. The pin bar must take shape near the nose of the inside bar
. Once you identify the pin bar, you then look out for a smallish inside bar. If you’re able to identify these two candles, you’ve got yourself a pin bar/inside bar combination set up. And when this setup takes shape, it’s time to make your entry trade. Just make sure you make your entry trade along the support level. You then put your stop loss preferably below the pin bar.
Let’s look at a couple of examples starting with:
Pin Bar/Inside Bar At Support Level
The GBP/USD graphic shows in living color the formation of the pin bar/inside bar pattern at the line of support. Seethe way the market pulls back before the combination unfolds. Also the multiple inside bars also signals the possibility of a decent profit. We can put in an entry trade below the pin bar and the stop loss along the line of support.
Last but not least is Pin Bar/Inside Bar as Reversal
This is the pinbar – inside bar combination in reversal mode at the line of resistance. The red box attests to that fact. It starts with a false break and then heads for the valley. (Oh boy!Those who jumped into the fray without thinking fooling must be gnashing their teeth now). You can get a tight entry once the inside bar retraces up the inside bar’s tail.
You can also protect you trading position by placing your stop loss just above the level or resistance or near the pin bar’s high. If you want freshen up on your false break knowledge, get in touch with my post, Trade The False Break
Last but not least:
How do we Trade The Inside Bar/Pin Bar Combination?
You’d be better off trading this combination during the daytime. If it’s an uptrend, Wait for the bulls to break through the level of support and then place your entry trade above the high of the inside bar, mother bar. If you’re trading in a bearish situation, just place your sell order once price breaks down just below inside-pin bar’s mother bar. Let’s look at a few illustrations starting with:
Inside Bar/Pin Bar at Uptrend
Here,in front of us is the breakout above the high of the mother bar. Price breaks out above the mother bar, creating the perfect opportunity to enter a trade. Just place your buy entry just above the mother bar. Then place your your stop loss at the point of consolidation – Just behind the price breakout.
Next up is
Inside Bar – Pin Bar at Down Trend
This is the inside bar/pin bar combination in bearish mode. The inside bar – pin bar combo is nicely cased in the red box, triggering a huge bear continuation after a brief period of consolidation. This will be the perfect time to place your entry just around the point of retrace. You’ll get a better risk:reward ratio entering this way. Just to be on the safe side, you place your stop loss below the tail of the pin.
That’s a wrap for “We’re Trading Pin Bar/Inside Bar Combination”. This strategy can make you some decent profits if you recognize the right combinations. For the pin bar/inside bar look out for a tall pin bar eclipsing a smaller inside bar. Conversely, for the inside bar/pin bar pattern look out for a pin bar within the range of a bigger, protective mother bar. If you’re able to recognize these characteristics, your trading account will be singing glee.
Til next time take care.
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