In my previous lesson, I taught you what Pin Bars are, how to effectively identify them and gave a few examples. I hope that you did your homework and spent some time looking at your daily charts this past week to get a good feel of what you are looking for. If you have not watched, read and implemented my previous lesson, please CLICK HERE before continuing and then come back to this lesson after.
Now I am going to introduce you to the Pin Bar Break Method, how to effectively use it and how to plan each day of trading ahead with set entries, stop losses and take profits.
What Is The Pin Bar Break Method?
The Pin Bar Break Method is based off of price breaking the nose of the pin bar the next day. By setting your Stop order after the formation of the daily candle, your trade either fills and hits the SL (stop loss) or TP (take profit), or doesn’t fill at all with no money lost.
What Are Stop & Limit Orders?
A Stop Order is an order that is put into place when the trader wants price to equal X price higher for a long position or lower for a short position instead of current market price. A Sell Stop would mean that the trader wants price to reach a lower target than current market price before the short or sell position is executed. A Buy Stop would mean that the trader wants price to reach a higher target than current market price before the long or buy position is executed.
A Limit Order is an order that is put into place when the trader wants price to equal X price higher for a short position or lower for a long position. A Sell Limit would mean that the trader wants price to reach a higher target than current market price before the short or sell position is executed. A Buy Limit would mean that the trader wants price to reach a lower target than current market price before the long or buy position is executed.
Setting Your Stop Order
After the formation of a daily pin bar, you can set a stop order, so that upon the break of the nose of the pin bar, the order is executed with a set TP and SL order. If the order fills, you are aware ahead of time what the potential loss and profit level are ahead of time. If the risk to reward is not favorable to your risk management plan, then do not set the stop order, simply wait for the next pin bar setup.
Let me show you some examples of a pin bar breakout:
In the example above, you see that the Sell Stop was set for the bearish pin bar at 10 pips below the nose with an SL at 10 pips above the high of the candle and a TP at the previous support level. The Buy Stop was set for the bullish pin bar at 10 pips above the nose with an SL at 10 pips below the low of the candle and a TP at the previous resistance level.
Putting The Pin Bar Break Method Into Effect
Now that you understand what the Pin Bar Break Method is, the difference between Sell vs Stop orders, where to place the TP and SL levels, I’d like you to take the next week focusing on identifying solid pin bar setups and using your demo account to set your stop orders with TP and SL levels. I’d like you to look back at previous months and get a good feel for the outcome of the trades you would enter and how they will impact your trading.
Next week I am going to explain to you the Fibonacci and 50% Rule to help minimize risk and increase reward on the traditional pin bar break method and you will be well on your way to some increased profits in your forex trading account by implementing all of these aspects into your daily trading routine!