What’s the most powerful price action signal in Forex trading? One really stands out: the humble pin bar. Rookies learning how to trade Forex really need to know how to distinguish between bad pin par signals and good pin bar signals. Here are five common mistakes to avoid:
- Not starting by trading pin bars in trending markets
Putting it simply, any price action signal will work better when it has the energy and momentum of a market trend driving it. Don’t kid yourself that you can trade pin bars against the trend before you’ve learnt how to trade them with the trend. Always seek out pin bars with the trend first.
2. Not beginning with daily charts
If you don’t start trading pin bars on daily chart time frames, you’ll get your fingers burnt. The smaller the time frame, the less reliable the price action signal will be. Unlike the daily charts, smaller time frames are vulnerable random price fluctuations and market noise, neither of which mean anything. Pin bar setups in these slots often look favourable when they really aren’t.
3. Ignoring market context
Good pin bar signals tend to make sense in the market conditions they’re tracking. That’s true even of the smaller time frames such as one-hour or four-hour pin bars. If the signal simply doesn’t make sense with either the key chart levels r the trend on daily charts, don’t gamble – give it a miss.
4. Placing stop losses near to entry
A basic rule of thumb is that good trades tend to take more time to play out than you might expect. Markets, by their nature, frequently fluctuate meaninglessly. If your stop loss is too close to your entry, then you risk losing out on a good trade.
5. Inadequate Forex learning
Novice traders often think they’re trading a pin bar set up when they’re not actually trading a pin bar at all. If you’re going to trade Forex, get informed – Forex trading courses are there for a reason!