Pin bars are my favourite way to trade the forex markets, they are a reliable price action signal which occur every now and then. A pin bar is a candlestick with a tail. This tail shows a rejection of a certain direction in the market. If we can see that price has rejected a certain level or area with a tail, we can assume that there is a good chance that price will go in the opposite direction to this tail.
Pins alone don't mean much. We must read the price action that is on our charts and from this decide whether or not we will take the trade, we must use our discretion.
Support and resistance are the obvious things that we should be looking at. And with the use of pin bars we can often see what the traders think of these levels in the market. A rejection of a solid support or resistance level by a pin bar is usually an instant trade for me. But again we must look at the overall picture and read what's going on in the market.
The best pin bars close in the direction we are looking to trade. So a bearish pin will have a tail which rejects higher prices and the best ones will have a close lower than the open, this shows us that the bulls came in and drove price up, then it reversed during the session and ended up closing below the open. This is more bearish than if it closed above the open. The opposite of all this is true for bullish pins
My absolute favourite way to trade is to wait for price to break a key support or resistance level in the market. Once this happens I will wait for a retrace back to this level. If we broke support then this level will become new resistance and vice versa. If we form a pin bar on the retest we have a very high probability trade setup.
I will usually enter pin bars at the close of the candle, or wait for it to break the low or high in the direction were trading. I know some people advocate waiting for a retrace of a pin so that they get a better price, but so often this never happens and we end up missing out on great trades. The best pins are on the daily and 4hr charts, below this and we're looking at more "noise" and they are not as reliable.
Pins are a simple price action setup that I believe anyone can master and make money with. You don't need to use indicators and you don't need to sit all day in front of a computer. Checking your charts once a day or ever 4 hours is all you need to do to look for setups. Let the market do the work!