How to Trade Fake Pin Bars

One of the more compelling entry triggers via price action is the Pin Bar.

Pin Bar, which is short for ‘Pinocchio Bar,’ is a single candlestick setup that clues price action traders into potential reversals in the market. A pin bar is an elongated wick that ‘sticks out’ from price action. Traders will usually look for one-sided wicks that are two times the size of the candlesticks body.

When traders see elongated wicks sticking out from price action, they can look for the momentum that created the long wick to continue by looking for a reversal.

So if a trader sees a long wick sticking out below price action; they can look to go long. If a trader sees a long wick sticking out above price action, they may want to look to go short.

Much like Pinocchio’s nose – the elongated wick of a pin bar can tell us that a lie is being told.

But not all long wicks are created equal. As a matter of fact, many of these long wicks will not be Pin Bars at all; but that does not mean that they can’t be used by Price Action traders. This article will walk through how to trade ‘fake’ Pin Bars, or long wicks that do not stick out from price action.

What separates a Pin Bar from a Fake Pin Bar?

The difference between a Pin Bar and a Fake Pin Bar is determined by recent price action.

If the long wick sticks out from recent prices, that is a Pin Bar. This is the ‘lie’ that the market may be telling us: That a movement to a previously untested level has brought a new group of buyers (or sellers in the case of a bearish Pin Bar).

If the long wick does not stick out from previous price action; they are not a genuine Pin Bar, but rather ‘Fake Pin Bars.’ The picture below will illustrate with further detail:

Created with Marketscope/Trading Station

As you can see above picture, the fake pin bar doesn’t quite stick out from previous and recent price action.

With a genuine pin bar leaving a long wick above the candle, traders could look to open a short position to take part in the momentum that created the long wick in the first place.

However, as you can see from the above setup – that would not have worked out too well.

Trading Fake Pin Bars requires additional analysis, as the signal of a short-term reversal in prices may not be as consistent as that of a genuine pin bar.