How to Trade Long-Tail Pin Bars

To trade a long tailed pin bar properly, you must focus on context, location, and confirmation. A long wick or shadow on its own means nothing if it appears in the wrong place. When in the right environment and traded correctly, it can offer high probability opportunities and less risky entries.

Let’s learn the identity of this candlestick pattern, the types, and how to trade it.

What is a long wick candlestick

It is a candlestick with a very long tail with a small body at the extreme and a short (or almost invisible) opposite wick. If the body is at the center, it is not a pin bar.

Why the “long tail” matters

The tail tells a story. It represents a failed breakout. It signifies a strong rejection. It means the market was aggressively pushed back by opposing participants (buyers or sellers) when it attempted to move in one direction.

Types of long-tail pin bars

Bullish pin bar: It has a long lower tail, telling us that buyers rejected lower prices. This candle is also known as a Hammer when it forms at support. The long lower wick implies that bulls have moved in after sellers pushed price down. Here, the message is that buyers are gaining control.

This candle is strongest at support, after a pullback in an uptrend, or after a long bearish move (exhaustion). It generally signifies a potential bullish reversal or continuation.

Bearish pin bar: An elongated upper tail candle. This situation (or graphical event) simply means that sellers resisted higher prices. It is called a Shooting Star when it appears at resistance. The long upper wick shows selling pressure and a potential reversal.

This formation is most meaningful when it appears at resistance, after a rally in a downtrend or after an extended bullish move. It warns of a possible bearish reversal or pullback.

Inverted hammer: IH can appear in various situations; most common at support or after a downtrend. It has a long upper tail and a small body at the bottom. It commonly means that buyers are testing the waters, but confirmation is needed.

Unlike the hammer or shooting star, the inverted hammer is not a sign to trade immediately. It is more of a warning that momentum may be shifting.

Best market scenarios to trade long tail pin bars

Key support and resistance levels: Long tailed pin bars are most powerful when they form at previous highs or lows, daily or weekly S/R levels, supply and demand zones.

A pin bar in the middle of nowhere is usually noise (with almost no relevance).

Trend direction: Following the dominant trend is the most ideal technique when it comes to long tail pin bar trading. In an uptrend, find bullish pin bars at pullbacks. Look for bearish pin bars at shallow retracements in a bear market.

Trading against the trend: When trading a pin bar against a trend, it is recommended you do so from a key chart level of support and resistance. As we stated earlier, appearing at a key level increases reliability or probability of reversal.

Higher timeframes: These pin bars work best on 4hrs and daily charts. Lower timeframes tend to create more false signals due to market noise.

How to trade long tail pin bars

1. Find the setup and location: Confirm the clear long tail (at least 3 to 4 times the body) with a small candle body. It should be formed at a meaningful price level, in line with market structure or trend.

2. Entry: The conservative approach is to enter after the candle closes. For a bullish pin bar, buy above its high. Sell below the low of a bearish pin bar. Alternatively, you can place a limit order at the halfway point of the tail – The 50% rule. This method gives a better risk-to-reward, but it’s more risky. It is more productive when the pin bar forms after a liquidity grab.

3. Stop loss placement: Place your stop beyond the tail. A few pips behind the end of the tail allowing room for spread and volatility.

4. Profit target: Aim the nearest S/R levels. Go for a minimum of 1:2 risk/reward.

FAQs

Can long-tailed pin bars be traded alone?

No. Long tail pin bars should not be traded in isolation. They work best when combined with confluence like trend direction, key support or resistance levels, and market structure.

Are long tail pin bars reversal or continuation signals?

They can be both. It all depends on the environment. At key support or resistance, they might mean a possible reversal. In a strong trend after a pullback, they hint at trend continuation. You should always examine the surrounding market context.

Do long tail pin bars work in ranging markets?

Yes, especially at range highs and lows. They are known to signal false breakouts and price rejection in sideways markets.