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Ways on How You Can Trade With Fake Pin Bars

The Pinnochio Bar, also known as the pin bar is one of the most riveting entry triggers through price market. It is this single candlestick setup that gives clues to price action traders about potential reversals in the market. In a nutshell, a pin bar is an elongated wick that ‘sticks out’ from price action. Normally, traders look out for one-sided wicks that are twice the size of the candlesticks’ body. As a trader, when you see elongated wicks sticking out from price action, you are required to spot the momentum that created the long wick in order to continue looking for a reversal.

However, when a trader sees a long wick sticking out below price action, they may want to look to go short. Just like Pinocchio’s nose, a pin bar’s elongated wick can tell you when a lie is between told. Not all wicks are created equal in that many of them are Pin Bars at all. However, this doesn’t mean that they can’t be used by price action. Therefore, here is how to trade long wicks that do not stick out from price action sometimes known as ‘fake’ Pin Bars.

How do you differentiate a genuine Pin Bar from a Fake Pin Bar?

Recent price action is what determines the difference between Pin Bar and Fake Pin Bar. If you notice the long wick is sticking out from recent prices, then that is a Pin Bar. The market may be lying to us that a movement to a level that was untested before has resulted in a new group of buyers or sellers in the case of a bearish Pin Bar. However, if the long wick doesn’t from the previous price action, it means that they are not genuine Pin Bars but rather fake ones.

Since a genuine pin bar leaves a long wick above the candle, a Rakuten trader can take part in the momentum which created the long wick in the first place by looking to open a short position. Trading fake pin bars requires extra analysis because the signal of a short-term reversal in prices may not be as consistent as that one of a genuine pin bar.

How to trade with fake Pin Bars

The first thing you need to get comfortable with when looking for genuine Pin Bars or Fake Pin Bars, is this: What it is that you’re looking to take part in by trading that setup?

Imagine a pin bar that is attractive because of the price has been reversed enough times leaving a long wick exposed underneath the price action. Now imagine that the long wick isn’t sitting outside of the recent price action.

What this could mean is that the potential for a reversal on fake pin bars may be smaller than that of a genuine pin bar. However, this doesn’t mean that as a price action trader you can’t use this information to your advantage. All you need to know is which fake pin bars might favor your trade and which ones won’t.

You can only trade Fake Pin Bars through carefully studying currency pair’s trend and then attempt to ONLY enter in the direction of the longer term trend. You can also use price analysis to qualify and analyze trends. To do this, you might want to scroll out on your trading charts and examine more previous prices than you would while trading genuine pin bars. The primary reason for this is so that you might get a better analysis of the long-term trend as well as look to only trade in that same direction.

Trading using fake pin bars isn’t recommended for novice traders unless you are willing to learn all the ropes around it. You should be willing to learn how to trade with genuine pin bars too as well as reading the trading charts. Remember, just because a pin bar isn’t genuine it doesn’t mean you can’t capitalize on it. For more information visit https://sec.rakuten.com.au/

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