The USDCAD printed a pin bar reversal on the daily price action chart that is a sucker setup with the pin bar sitting in no-mans land and being ready to be run over. This bullish pin bar reversal was not sticking right down at a swing low like we would need to see for a high probability trade setup; but instead, price was just sitting there after price had made a sideways consolidation movement.
There is a heck of a lot we can learn from this trade setup. I am regularly asked by you and other traders to not just cover the trades that are working out and what is upcoming, but why trades are failing and to recap why trades have failed and that is why I want to take a close look at this daily trade setup.
As we know, the most important point of all high probability price action trades is the price action story and where the trade is played from within the chart. For this pin bar reversal, we can see on the charts below that before it formed, price had been trading into a windup and tight consolidation period. Instead of then moving down to a swing low, and then forming the pin bar, price formed the pin bar within the consolidation and traffic jam.
Because of where the pin bar was formed, it meant it was not at a swing low. It also meant it was not sticking out and away from all other price like the best A+ pin bars do. This meant that even if price could break higher and confirm the trigger signal, it would have only traded straight into traffic overhead and straight into a major daily resistance area where it would have been likely to have been rejected and move back lower anyway. I discuss this in an in-depth lesson at Where Traders go Wrong With the Pin Bar Reversal.
When analyzing this pin bar or any future pin bar, you are looking to enter, keep the mindset of a price action trader, and NOT a pattern trader. You are looking at the WHOLE price action chart and not just the last candle or the last pin bar. You need to analyse how the pin bar fits into the overall price action story.
Daily Chart – Bullish Pin Bar
Daily Chart – Overhead Resistance
Leave a Reply