AUD/JPY Pin Bar Entry Example
In this short article I will show you what I look for in order to find a low risk, high reward trade using a pin bar set up strategy.
When we’re scanning through the charts of the major currency pairs, what is it that we’re looking for that keys us in that there may be a good opportunity in the making?
The first thing I look for is nearby horizontal support or resistance. I begin on a zoomed out daily chart, in this case the AUD/JPY pair (see image below).
click on image to enlarge
I had previously marked the resistance zone above and the support area below using recent swing highs and swing lows on the daily chart. At the start of the day where the orange box is located, I noticed the bear candle was heading down to the area of support I was interested in. At this point I set an alert to notify me using both email and SMS (text) messaging when price came within 25 pips of support. Let’s take a closer look at the daily chart.
click image to enlarge
So, how do we determine which direction we should trade in? The daily candle that’s forming is massively bearish as it’s making it’s way to support. The one thing I know for sure is the trend is up and I’m actively looking for a long trade. I want to see what happens when price hits that support line. I have time. It’s not like price is moving at the speed of light. As price comes down to touch my previously marked support level on the H4 chart, I’m greeted with this pin bar at the close of the H4 period:
click image to enlarge
The candle inside the orange box on the H4 chart is a perfect pin bar entry. We get ready to enter the trade at the close of the candle. Our stop is approximately 29-30 pips. Our risk is between 2.5-5% of account size. We see there’s a very good chance for a 2:1 or greater reward to risk for the trade. There’s nothing to do now but enter the trade at the close of the pin bar candle. Once we’re in the trade, we close the charts, wait four hours, and then check to see how the trade is progressing. My belief is that the trade will head all the way back up the the resistance zone. Because of that belief, I don’t get rattled when price tests some local resistance and then heads back down for another test of support. This type of price action is not uncommon. In fact, I’m feeling very good about the trade as it bounces away from the support area, creating a higher low in comparison to our original entry area.
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