Common Mistakes Rookie Traders Make When Trading Using the Pin Strategy
The Pinocchio Bar is considered to be the most price action signal in the world of trading ever to exist. If you were to ask seasoned traders to pick one price action to trade with for the rest of their lives, they would probably choose the pin bar. However, despite the pin bar structure looking simple, it can be very tricky to trade especially if you're a rookie trader and you don't know how to differentiate between a good pin bar and a bad one.
Many new traders often make the same mistake over and over when trading with pin bars. They continuously try trading counter-trend pin bars or give no consideration to the market context the pin bar is formed within, or they trade every pin they see. However, there are a plethora of subtleties to trading pin bars you need to understand if you ever want to become a successful pin bar trader. Here are some of the biggest mistakes rookie traders make when trading with pin bars.
Trading without initially learning how to trade on daily charts and in trending markets
When it comes to successful pin bar trading, you need to learn how to trade in trending markets. This is because any price action signal or setup has a better chancing of working out with the momentum and power of a market trend championing it. Markets trend for a plethora of reasons, but it doesn't matter what the exact reasons are, what you need to care about is whether a market is trending or not. This will help you decide whether or not to jump on-board that trend and take full advantage of its power.
Similarly, if you can't successful trade pin bars on the daily chart frames, then you won't be able to trade them on any lower time frame either successfully. Even a Rakuten forex broker will tell you that the daily chart is the best time to trade pin bars. Due to random price and market noise, the lower in time frame you go, the less the chance you have of any given price action signal to work out.
Putting your stop loss too close to the entry
A common mistake that rookie traders make with pin bar reversal strategy is that they put their stop losses to close to the entry. You need to understand that good trades often take longer to play out than expected and with it comes the fact that markets fluctuate across time which is often meaningless. Therefore, you don't want to prematurely get shut out of a good pin bar trade just because your stop loss was too close.
As a rookie trader, you need to do is find the most logical level or point on the chart which will invalidate your pin bar trade if the price moves beyond it. In most cases, this level or point is often further away than most people think it should be or want it to be.
Trading with pin bars without market context
Pin bars tend to be very powerful price action signals if they occur at the right time at the right place on the chart. Typically, the best pin bar signals will occur at a confluent area or level on the chart. While there are plenty of pin bars that you might spot on any given price chart, not all of them are equal. Therefore, it is the amount and type of confluence that makes the pin bar better or worse than another. A good pin bar signal should make sense on context to the current market conditions that occur on the daily chart.
There are plenty of other mistakes that rookie traders make when trading pin bars, these are just some of the most common ones. Hopefully, from the lessons learned above, you will know how to avoid them and become a better trader.