Gold investors have to look at a multitude of different strategies to find the best one for them. The pin bar trading strategy can be one of the most effective once you learn exactly how to use it in your gold trading. The components of a pin bar include the tail, the nose and the body. Most gold traders use candlestick charts since the information is displayed more clearly and you can easily see the price action. The pin bar formation is slightly complicated to learn, but with a little time and effort, you’ll be able to capitalize your gold investment with it.
Understanding the Pin Bar Formation
Every pin bar has a long lower or upper tail, which shows a false break of a chart level. The body is usually evident because it is filled in with another color on the chart. The nose is on the opposite side of the tail.
In general, the longer the tail is, the better the price action is. A bullish pin bar reversal will show the tail pointing downward, indicating a rejection of low prices, and generally leading to an increase in gold price. A bearish pin bar reversal shows the tail pointing upward, indicating a rejection of high prices, and generally leading to a decrease in gold price.
Entry Types With the Pin Bar
- Limit Entry – When using this entry type, you have to place it above market price if you are selling, and below market price if you’re buying.
- At Market Entry – A market entry is placed at the market price at the time. These could either be bullish or bearish pins, indicating a buy market or a sell market entry.
- On Stop Entry – Stop loss entry placements can be tricky. In order to trigger the stop entry, the market will have to move up to get into your buy stop or move down to get into your sell stop.
When to Utilize Pin Bar Strategies
It’s entirely possible to revolve your entire gold trading strategy around the pin bar strategy. However, most gold traders find it’s better to combine it with other strategies to see the most success. The hardest part about pin bar strategies is learning how to use it. However, once you reach that point, you’ll understand why people have so much success with it.
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