trader_dante
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Everywhere you turn at the moment there is someone talking about "pin bars": Forex Price Action Strategies - Traders Laboratory
I take this as a disturbing sign for those that trade them.
As Niederhoffer wrote in Education of a Speculator:
The...speculator notices that the trend followers just had a great run. They're all sitting on lots of cash, just waiting for the next trend. But when too much easy money is made, speculators look to make a fast buck by imitating the big boys, and dealers who study the points know that a change of trend will occur if certain key points are triggered. They start moving prices up to these points in anticipation. The probability of a successful trend-following trade is reduced.
The public can never catch up to the changes in cycles. Just when they're ready to follow a system, it's the wrong time.
If a strong hand realises that the break of a pin will enter enough amateurs into the market then breaking the pin becomes a quick play. And in these times, when liquidity is low across the board, it becomes even easier. A lot of players are hitting market at the moment rather than sitting on bids and offers and many of the computers have been turned off. I'm not sure if anyone has been watching the Cable Futures but liquidity is dropping off fast - if price got within 10-20 pips of breaking a pin I could probably push it through with a 1 lot (£3 a tick) just by hitting an offer when the spread widens which I have seen it do by as much as 15 pips when the computers are off.
A good trader must stay ahead of the game and not rely heavily on one thing.
You have to be wiser than simply looking for pin bars or you will always be behind the game.
This is why I have felt (and still feel) dismayed when I get people spouting out about 15m pins here, 5m pins there. It's not about the pin. The pin is about as important as having a pen is to play the lottery. If you want to win the lottery the only thing that will do it for you is PICKING THE RIGHT NUMBERS.
I hoped that eventually some of the people that read my posts would read between the lines and realise that if the price is the key to the strategy then one can trade where they would want a pin bar to form, to both reduce risk and increase reward.
Of course, a new problem would then present itself: will the market continue or reverse? Is there a squeeze taking place? And these two problems would concentrate a traders focus in a new direction: perhaps levels would then be watched with regard to volume and order flow (the size and speed of transactions) in order to keep abreast of the weak hands. Or perhaps they would look at other patterns - patterns that repeat themselves at all times because the locals are humans and human behaviour can be read.
The introduction I gave in my original thread will, I hope, teach new traders several key things among others:
1) Basic technical analysis can be profitable
2) Price discovery is always taking place but by defining the high probability reversal or continuation pivots, the trader can understand the concept of defining an optimum entry into a swing
3) One can read the price action to make profitable trades. The simple setups illustrate the markets movements - pin bars show temporary price rejection. Inside bars show temporary price consolidation.
4) Patience is key. The patience to wait for setups and the patience to stay with winning positions.
But you must always stay ahead of the game.
Sooner or later I may another thread teaching what I have learnt but this time I will probably make it a private forum for followers of my original that want to trade with tighter stops and want to learn how to read the tape (the order flow) to refine their entries. That way it keeps out those that read but never post and those that take but never give.
But in the meantime, study the market. Keep it simple but know the limitations of any strategy you trade and always work to improve yourself.
I take this as a disturbing sign for those that trade them.
As Niederhoffer wrote in Education of a Speculator:
The...speculator notices that the trend followers just had a great run. They're all sitting on lots of cash, just waiting for the next trend. But when too much easy money is made, speculators look to make a fast buck by imitating the big boys, and dealers who study the points know that a change of trend will occur if certain key points are triggered. They start moving prices up to these points in anticipation. The probability of a successful trend-following trade is reduced.
The public can never catch up to the changes in cycles. Just when they're ready to follow a system, it's the wrong time.
If a strong hand realises that the break of a pin will enter enough amateurs into the market then breaking the pin becomes a quick play. And in these times, when liquidity is low across the board, it becomes even easier. A lot of players are hitting market at the moment rather than sitting on bids and offers and many of the computers have been turned off. I'm not sure if anyone has been watching the Cable Futures but liquidity is dropping off fast - if price got within 10-20 pips of breaking a pin I could probably push it through with a 1 lot (£3 a tick) just by hitting an offer when the spread widens which I have seen it do by as much as 15 pips when the computers are off.
A good trader must stay ahead of the game and not rely heavily on one thing.
You have to be wiser than simply looking for pin bars or you will always be behind the game.
This is why I have felt (and still feel) dismayed when I get people spouting out about 15m pins here, 5m pins there. It's not about the pin. The pin is about as important as having a pen is to play the lottery. If you want to win the lottery the only thing that will do it for you is PICKING THE RIGHT NUMBERS.
I hoped that eventually some of the people that read my posts would read between the lines and realise that if the price is the key to the strategy then one can trade where they would want a pin bar to form, to both reduce risk and increase reward.
Of course, a new problem would then present itself: will the market continue or reverse? Is there a squeeze taking place? And these two problems would concentrate a traders focus in a new direction: perhaps levels would then be watched with regard to volume and order flow (the size and speed of transactions) in order to keep abreast of the weak hands. Or perhaps they would look at other patterns - patterns that repeat themselves at all times because the locals are humans and human behaviour can be read.
The introduction I gave in my original thread will, I hope, teach new traders several key things among others:
1) Basic technical analysis can be profitable
2) Price discovery is always taking place but by defining the high probability reversal or continuation pivots, the trader can understand the concept of defining an optimum entry into a swing
3) One can read the price action to make profitable trades. The simple setups illustrate the markets movements - pin bars show temporary price rejection. Inside bars show temporary price consolidation.
4) Patience is key. The patience to wait for setups and the patience to stay with winning positions.
But you must always stay ahead of the game.
Sooner or later I may another thread teaching what I have learnt but this time I will probably make it a private forum for followers of my original that want to trade with tighter stops and want to learn how to read the tape (the order flow) to refine their entries. That way it keeps out those that read but never post and those that take but never give.
But in the meantime, study the market. Keep it simple but know the limitations of any strategy you trade and always work to improve yourself.
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