Pin bar Forex Reversal Strategy

The Pin bar Forex Reversal strategy offers traders the ability to trade price reversal in the market securely and in a profitable manner.

Being able to spot pin bars around areas of support and resistance is key in spotting buy and sell opportunities in the market.

Chart Setup

MetaTrader4 Indicators: 200 EMA, Disparity_Index.ex4 (Input Variable modified; DispPeriod=39), Doda-BBands.ex4 (Input Variable modified; Length=30)

Preferred Time Frame(s): Any

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy order if the following indicator or chart pattern gets displayed:

  1. Spot a bullish pin bar formation on the activity chart, if it finds support around the 200 EMA, it is signaling upward price pressure, hence a trigger to go long on the currency of focus.
  2. If the royal blue dotted line of the Doda-BBands.ex4 custom indicator aligns below price bars as shown on Fig. 1.0, the market sentiment is said to be bullish i.e. a trigger to buy the pair of interest.
  3. If the red line of the Disparity_Index.ex4 custom indicator breaks above the 0.00 signal level, price is said to be favoring momentum to the upside, hence a buy order will suffice.

Stop Loss for Buy Entry: Place stop loss 2 pips below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following holds true:

  1. If a reversal pattern is spotted around a resistance level (somewhat below the 200 EMA), it is a trigger to exit or take profit at once.
  2. If the dotted line of the Doda-BBands.ex4 custom indicator turns red and is aligned somewhat above price bars, an exit or take profit is advised.
  3. If the red line of the Disparity_Index.ex4 custom indicator breaks below the 0.00 signal level during a buy alert, an exit or take profit is recommend.

Sell Entry Rules

Enter a sell order if the following rules or conditions takes precedence:

  1. Spot a bearish pin bar formation on the activity chart, if it finds resistance around the 200 EMA, it is pointing to downward price pressure, hence a trigger to sell the currency of focus.
  2. If the red dotted line of the Doda-BBands.ex4 custom indicator aligns above price bars as shown on Fig. 1.1, the market sentiment is said to be bearish i.e. a trigger to sell the pair of interest.
  3. If the red line of the Disparity_Index.ex4 custom indicator breaks below the 0.00 signal level, price is said to be pushed lower i.e. a trigger to sell.

Stop Loss for Sell Entry: Place stop loss 2 pips above immediate resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following holds sway:

  1. If a reversal pattern is spotted around a support level (somewhat above the 200 EMA), it is a trigger to exit or take profit at once.
  2. If the dotted line of the Doda-BBands.ex4 custom indicator turns royal blue and is aligned somewhat below price bars, an exit or take profit is advised.
  3. If the red line of the Disparity_Index.ex4 custom indicator breaks above the 0.00 signal level during a sell signal, an exit or take profit is recommend.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

Pin bars offer traders clues on price actions and as such they are individual candlestick pattern that are usually recognized by their small bodies and long wick.

The Doda-BBands.ex4 indicator is the modified version of Bollinger band and generates buy and sell signals based on this premise.

The 200 EMA is an exponential moving average indicator that is used to confirm long term trends and does also serve as a support or resistance price tool.

The Disparity_Index.ex4 custom indicator is a technical momentum that links market price to a time-specific moving average of the prices in the market.

Chartists tend to use the disparity index as a tool to spot signals of trend strength and the likelihood of an impending exhaustion.

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