Today we are going to learn about how to trade a pin bar with a long tail-some will call it a long-tailed pin bar. This is a definitely a pin bar with a difference. Why? Because it has this long wick that you can’t miss. I call it the peacock of candlesticks in terms of the majesty with which it stands out among the rest of the candlesticks on the charts. Not only does it know how to make an appearance but it plays a great role in making you a decent profit too.
I can hear” Wait a minute, I thought all pin bars were the same.” Well,sorry dearie, in life, not everybody is created equal. Yes, all pin bars may be simple as strong as pit bulls and very reliable. But the long-tailed pin bar is the top dog of them all. After you are done reading this post, you’ll come to why the long-tailed pin bar is the top dog of all pin bars.
What’s the Difference Between Normal Pin Bars from Long-tailed Pin Bars?
Well Let me show you using the price action chart below:
Now this is what the long-tailed pin bars look like up close and personal at the end of the bullish trend just before the bears take over. The long tail sticks out from the surrounding pin bars. It looks so obvious and conspicuous that there is no way you can miss this one. It has a small, or skinny body and a longer wick ,hence the nickname, long tailed-pin bar(The ‘Small Body’label’ says it all). When on a bullish trend the long tail of the pin bar sticks out from the top like a tower. However if it were on a bearish trend,the long tail will stick out from the bottom.You’d think it was doing a head stand..
The normal pin bar on has a bigger body and short wick, as indicated by the red arrow. It’s probably jealous of all the attention is long-tailed sibling is getting.
A Few Things You Need To Know About Long-Tailed Pin Bars
Their tails are a lot longer than the surrounding pin bars. Think of Jack and the Bean Stalk when looking out for long-tailed pin bars. And they are also valuable high probability signals. In other words, they provide great opportunities to make a profit. However, a word of caution: Their appearances are very irregular but when they do show up they do cause the market to make major moves. They’re like shooting stars.They’re here today, gone tomorrow.
Long-tailed pin bars are more than just fancy trade signals. They help us gain valuable insight into the mindset of the majors in the market and the dynamics of the market itself. As much as a long-tailed pin bar is majestic, it also signals it’s running out of gas. However, if it’s a trend continuation setup, it’s a strong indication that the trend continues. And at that point, the players are either bullish or bearish, depending on the mood of the market. And as a trader you’d most certainly have to keep that in mind as you scan the charts.
I guess the most appropriate question to ask will be: What Signals Do I Look When Trading Long-Tailed Pin Bars?
Look for Evidence of Confluence
I guess the best way to trade long-tailed pin bars is to look for evidence of confluence. By confluence I mean look for evidence of trade signals converging on the same key level at the same time. These key signals go by the simple acronym TSL – Trend, Level , Signal. If you can get at two out of these three indicators, you’re good to go. Let’s take a look at an example of confluence using the EUR/USD pair.
This a classic illustration of TSL in effect. The three circles indicate major confluence along the level of support which is also transforms into a level of resistance after a series of reversals/.. The first label indicates the bearish long-tailed pin bar touching the level of support.Along this same level of support the second circle points to a bullish long-tailed pin bar caressing the level of support. And lastly the third circle points to another bullish long-tailed pin bar .
Like I alluded to earlier, all these long tails fit the TSL requirements. Although the first pin bar looks a bit suspicious, the second and third long tails look more defined and inviting. It wont be such a bad idea to place buy pending orders above the highs of two either of these two long tails until the first close of the first candle. You’d most certainly see substantial profits heading in your direction. at
Look For Long-Tailed Potrusion At Key Levels
Yep! Look out for long-tailed protrusions by these celebrity pin bars at key levels. Doesn’t get simpler than that does it? You know often times long-tailed pin bars will counter a trend after a strong move whether up the hill or down the slope. It’s the nature of the beast so to speak. In that case look for these long tails to slice through these key levels within a ‘cant miss’ range. Or you look for a long tail protruding through a key level at a false break ensuing as a result. Veteran traders would definitely get a kick out of a false break as a lot of rookies tend to fall through this trap quite often. Not to mention the fact that these protrusions also lend themselves as confluence for these counter-trend long tails. Let’s take a look at an illustration using the USD/JPY pair.
Now take a look at the bullish long tail underneath third arrow along the new level of support. It’s in the midst of the obvious range that I alluded to. Now a closer look at the bearish pin bar along that same level of support. Now that sparks a brief fakey as traders anticipated a bullish trend. This is the kind of protruding scenarios you should look out for when trading counter-trends.
But then again we could see a sharp U-turn after sustained pressure, regardless of whether it’s the bulls or the bears going on a trend. Again, the long-tailed pin bar takes shape in this scenario. It’s just the market’ way of cooling off after heating up for a while. Let’s take a look at a long tail inspired sharp reversal using the GBP/USD pair.
Now take a look at the long tail pin bar at the tail end of the bears run at the first level of support. The long tail suggests the bears are losing steam because they’ve gone one step too far, causing the bulls to step in and start their own fire as they try start some fiery momentum of their own. The long tail also represents the market’s way of correcting itself when the engine is overheating..
Look for Long-Tailed Pin Bars With Trend and Confluence
Be on the look out for long-tailed pin bars with trend and confluence. Hmmmmm Now I can hear someone saying “What in the world is that?” Well what I really mean is look for long tails with good trend continuation signals as well. Of course they must have that look of confluence as well. There must b a coming together of these signals. You will most certainly find them after a pull back or at or close to key swing points. Let’s take a look at an illustration of this scenario.
We see a gorgeous illustration of trend and confluence along the first level of support.Take a look at the bullish long-tailed pin bar touching the level of support towards the far left . It’s basically saying “Get ready for a bearish run.” Now let’s takes a look at the nicely clad long tail at the resistance end , as indicated by the arrow. This suggests the beginning of a bullish offensive. However, a word of caution though: Don’t always jump in just because you see a nicely decorated long-tailed pin bar. It could be a sign of a negative reversal or a major meltdown. So to be forewarned is to be forearmed.
And last but not least:
How Do I Enter Trades On Long-Tailed Pin Bar Signals
You can enter trades on long-tailed pin bar signals a few ways:
This is very basic. Just go to your MT4 platform and place a ‘buy order’ if it’s bullish pin.If it’s a bearish pin you don’t need me to tell you to place a ‘sell order.’Do you? Below how to place a buy order
Just place a stop entry at the level you want to enter the market. A word of caution though: For the market to trigger your stop entry the market should move up to touch your buy stop or move on down to touch your sell stop. You also need to understand that your sell stop order must be under the current market price(including the spread) while your buy stop must be above the going price(including the spread). In layman’s language, in a bullish pin bar formation you out in your buy order when you see the high of the pin bar break for the hills. Whereas in a bearish bar formation you put in your sell order when the low of the pin bar breaks down the slope. Let’s take a look at both scenarios
As you can see the buy stop order is placed above the high of the long-tailed pin bar,as indicated by the white bar, in light of the bullish surge up the hills. You then place the stop order at the low of the bearish long-tailed pin bar on the heels of a bearish break down the slope.
You place the limit entry below the going price if you are buying. And you also place the limit price above the going price if you are selling. Some of you may be wondering”Well,what’s the rationale behind placing a limit entry on a long-tailed pin bar”? Well trading wisdom suggests that some pin bars pull back or retrace at the 50% level. So it makes sense to make your entry at that level with a limit order. In light of this interesting revelation you place your stop loss just above or below the pin bar high or low.Of course this creates the possibility of a huge profit. This is perfect for long-tailed pin bars largely because of this ‘cheching'(Sound of cash register) possibility. Let’s take a look at how the limit entry works with the long tails
As you can see the buy stop for a bullish pin is placed below the low of the long tail. Why the sell stop for a bearish pin is placed above the high of the long tail. However, as I alluded to earlier, you make your entry at 50% retracement for both the bulls and the bears. This is because some pin bars.especially the long tails are most likely to retrace, creating huge profits possibilities.
For more information on trade entries, read up on You need to Protect Your Trading Position and Profits With Pending Orders . And if you are confused about long-tailed pin bars I suggest you read Pin Bar Strategy – How To Trade It
That’s a wrap for ”Long-Tailed Pin Bar – A Pin Bar With A Difference .” As you can see, long-tailed pin bars definitely know how to an appearance. Their long taily wicks stand out so obviously that you can’t miss them. If you’re not still flummoxed or confused about which trade setup to choose, just stick with the long-tailed pin bars. You can’t go wrong with those.
Til next time take care.
Do You Want To Join The Forex Trading Gravy Train?
If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First, look up Why Forex Trade Is So Popular. Next, you learn the fundamentals of forex trading by reading Forex Trading Basics – Top To Bottom Part I and Forex Trading Basics – Top to Bottom Part II .
Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns . Also You Need To Know Ten Of These Candlestick Patterns .
And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis, instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading?
Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels. And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know How To Read Candlestick Patterns using Support and Resistance Levels.
However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch of several weeks, consult How to Spot High Probability Trades. And if you are still not sure about price action trading, find out Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the suggested posts above are the most important posts to get you started.
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