I recently had a really good Q&A session with a student in my price action course, who had asked a really important question. He was having a hard time discerning when to follow the rules to develop consistency in their forex trading, while having flexibility to ‘adjust‘ the rules in the right circumstances.

This is an absolutely fantastic question, and an important one for sure. Thus, I decided to write a two-part article on this subject, discussing the differences, advantages and disadvantages of rule based systems vs. discretionary systems.

In today’s article, I will introduce the student’s question, then share my response, what I see and why, along with a few added comments. In the companion article, I will talk about which of the two systems above I prefer, why I teach them, what are the advantages, and how you can develop them for your trading.

 

Steve’s Question (my student):

I see a conflict between striving to gain the consistency to follow the rules but then having the flexibility to know when to break the rules. If we are talking about consistency and always following rules then I am all for that but my, admittedly limited (2 year), experience tells me that the markets are unforgiving of mechanical systems, as what works during this 6 month period might not work in the next 6 month period. Or swap out 6 months and replace with an/other time period.

 

My Response Below:

“This is a really good question, and I’m glad you asked so will share several thoughts on this.

In the beginning – follow the rules. Learn them inside and out and follow them to the tee.

einstein rules dev2ndskies.wpengine.com

Why? Because this discipline forms the base of your training and mindset, which in turn allows you to build neural pathways that are critical to trading. If you do not follow the rules, or any set of rules in the beginning, then the neural pathways which form your base for trading knowledge you draw on, will be haphazard, and lead to inconsistent trading.

The other benefit of following the rules/building this discipline (in the beginning) is that it builds certain qualities (psychological) which will be highly useful for trading throughout your entire career. One example is patience – there will be many times you want to break the rules and trade a setup because something looks interesting to you in the charts.

Guess what? This will always be the case. There will always be other setups outside your rules. But deviating off course to try something on your live account isn’t the best place to find out. That should be done in demo or during simulation practice – not live trading.

During live trading, you should already have a clear set of rules in place which you follow inside and out. If there are no setups according to your rule based trading system, then that is part of the deal – but don’t let your impatience take you away from your discipline.

 

When Do You Break the Rules?

jimi hendrix forex trading rules dev2ndskies.wpengine.com
As to when to break the rules, this is only done after;

a) You can execute the system according to the rules without any thinking (i.e. automatically) – or on a sub-conscious level without thinking.

and

b) You are trading profitably already. This way if you adjust the rules and start losing money, you have a base to go back to where can resume making money while also trading consistently.

As to point a, we first have to get to the place where we are trading on a sub-conscious level which is only done through repetition. Very much like the archer who will do thousands of shots to make sure their mechanics are the same, we also have to build these neural pathways so we can execute our trades automatically, without thinking or hesitation.

When you get to this stage of trading sub-consciously, you’ve built the foundation of discipline, and have probably done enough trades (min. 100+ per system) to start seeing subtleties in the price action to ‘adjust‘ some of the entry rules a bit.

As to point b, the reason why we wait till we are already trading profitably, is this provides a SL on losing money. What do I mean by this? It is a psychological buffer, so that you always have something you can go back to (which will make money). This protects your mental capital, because you know you have something that already works.

Thus, if you are going to adjust/break the rules, this should be done practicing on demo or sim using your adjusted entries. Just make sure when you ‘adjust‘ your entries, you are still coming up with rules for those adjustments, so you can test the validity of those rules individually. The key is to know the difference between which rules can be adjusted, and which are the core of the system.

In one of my trader forums, I recently asked an important question to the students, ‘How does one trade consistently?‘ There were many interesting responses, some of them close, but none that hit the mark. There really is only one consistent trade strategy, yet it seems to elude most traders.

My guess is most of you have experienced this inconsistency in your trading, moreso in the beginning, but perhaps even still today. Have you ever asked these question to yourself, ‘why are my trading results all over the board?‘, or ‘why can’t I seem to trade consistently?

If you have, you are not alone as most developing traders are not able to trade consistently. This was demonstrated very nicely in an article which explored forex profitability over 8500 accounts.

The key takeaway’s from it are the following 2 points;

  1. Less than half of those who make profit in one quarter (2930) fail to profit in the next
  2. For those who do profit back to back quarters (~15% of the 8500 accounts), about half can do it multiple times

Thus, 1 in 3 traders are able to profit over a 3 month period, less than 1 in 6 can do so in back to back quarters, and less than 1 in 13 can do so consistently.

The underlying point – most traders do not trade consistently. Thus the question has to be asked, why are traders so inconsistent, and what can you do to trade consistently?

Is it the system? Is it the time frame I am using? Is it my money management?

The answer is no, so what is the answer? How can you become one of those 1 in 13? Are they just gifted, or have some special talent you don’t?

Not at all, and this one thing you are missing is something you can completely develop. There is only one way to find it in your trading, but you’ve been looking in all the wrong places, so I’m going to share the answer now.

The only way to trade consistently, is to have consistency in your mind. Having consistency in your thoughts, actions and thinking will bring consistency in your trading. It is the only way.

how to trade forex consistently building consistency in your mind dev2ndskies.wpengine.com
Try trading a new system every week for a month and tell me how your results are. Try using a different risk of ruin profile and tell me how your performance goes.

To have consistency in your trading you need to have it in your trading mindset. This is where it all starts.

This is why we have a trading plan, so we have fixed variables we work with day in-day out. This is why we have rule based systems, for if we change the rules, how would we ever know what is working and what is not?

Thus…
All inconsistency comes from the mind, while all consistency in performance does as well. If you are not focused in the moment, you will have inconsistency in performance, because the mind is on the moving thoughts – not the action you need to do in the moment.

Without a consistent picture in your mind what you need to do, how can you ever duplicate the results of your successful trading?

olympic archer consistent thinking dev2ndskies.wpengine.com
Do you think an Olympic archer has a completely different focus and mindset each time he pulls the bow? Do you think a professional golfer has no routine when hitting a golf ball? Absolutely not. They shoot / hit consistently, because they’ve programmed it into their mind what they need to do, and they just do that.

It is the exact same for trading.

Don’t have consistency in your trading and mindset now? No problem. The mind has neuro-plasticity to it, meaning you can physically build the neural pathways to think and trade consistently.

How do you build these neural pathways to trade forex consistently? There are several shortcuts you can take and do to build these in minutes per day. When you run these exercises and mind programs, you will find greater consistency in your trading then ever before.

I will discuss these shortcuts in an upcoming article, so stay tuned to the site for how to learn these tricks, and build consistency in your trading.

Often due to low liquidity, summer forex trading can be fickle, whimsical and often times dull. Staring at charts for hours or days when the price action is slow isn’t going to make you a better trader, or make more profits. We need to be using our time to improving our edge whether we are trading or not. So what do you do when the ‘watching the corn grow‘ moments come by?

Read more

I recently got an email from a new student who sent me a month of their trading prior to joining my course. Their story is just like many others – they traded well on demo, went live trading, and lost a fair amount of their account. Now they are trying to get back their losses in the quickest way possible.
Sound familiar?
I can appreciate wanting to make gains as quickly as possible. Who wouldn’t?  He asked me what is the fastest way to successful forex trading’?
fastest way to successful forex trading dev2ndskies.wpengine.com
Without a doubt, he had a sincere desire to trade consistently (most do). But two crucial things were missing from their plan.
These two things when done well, will lead to success in trading (and perhaps any skill) faster than hunting for that ‘magic system’ which will  make back all your losses. Without this necessary pair, what you want to accomplish (making money / trading successfully), will not happen. The results will not come.
So what are these two crucial things you need to focus on?  Process and Progress.
Although the goals (making money, trading from home, consistent profits) are what we strive for in trading, when results become the sole focus, your ability to make money trading becomes hindered.
Why?
In order to reach the level of trading profitably and consistently, you have to build the abilities and skill sets necessary to get there. It sounds obvious, almost easy when you hear it, but it is nothing of the sort. It is one of the most elusive aspects of the trading mindset which new traders fail to understand.
How do you get there?
Process First -Then Progress
This starts with focusing on the process by a) doing the steps necessary to build the skill set, which b) allows you to perform.
Do you think an architect started off by creating buildings? Or do you think they had to learn the math, geometry, and basic skills needed to build a structure?
architect focusing on process dev2ndskies.wpengine.com
If you focus on results only, you will skip steps because your focus is not on the task at hand. It sounds counter-intuitive, but your goal in the beginning should not be to make profits. It should be to acquire the abilities (through training and practice), which allow you to perform and trade well.
Remember this next statement well, but a trader will not gain the results wanted BEFORE obtaining and building the necessary skills to reach that result. This comes after you have built those skills.
This is why so many traders fail. They focus on result, not process.
If you think focusing on the process is not important, ask yourself;
‘When getting a complex heart surgery, do you want the doctor focusing on the money he makes from the surgery, or the very complex precise cut he is about to make around your heart?’
focusing on process heart surgery dev2ndskies.wpengine.com
Focusing on Progress
Moving on, once your focus is dedicated to the process, it’s time to track your progress (e.g. end of the trading week analysis).
In the very beginning, I have little concern for a traders profits or losses when they first come to me. My main concern is identifying what parts of the process they are missing or skipping. Then I have them refocus on that so they build the base skills needed.
For example, if a trader (you for example) has trouble keeping risk consistent, and fail to use the risk of ruin formula, you will not make money. So my first goal is to have you focus on keeping risk consistent (process). If you show improvement in this, I’ll have you track the ‘progress‘ you are making.
This latter focus gives you confidence. It communicates to your self-image and mindset you can improve, get better and grow. It self-reinforces you focusing on the process, which helps to see the progress you are making.
If you keep this focus, and don’t skip any steps – it is only a matter of time before you are making money trading.

In my prior article on the New York Daily Close Charts, I exposed the forex myth demonstrating how the New York Close Charts are not superior to the UK GMT 00.00 charts.

For my price action course members, I just updated our stats on the inside bar strategy, and compared the NY 5pm Close vs. the UK GMT 00.00 Close. For the second time, the results showed no superiority in performance.

Keep in mind, this is just a price action strategy I built, with no server time in mind. We tested it using identical parameters, and here are the results below;

FXCM UK GMT 00.00 Close
-9 Pairs Total Made the Cut
-13 Possible Trade Combinations (via pair/time frame)
-All 4 time frames had profitable setups (Daily, 4hr, 1hr, 30m)
-60% Hit Rate

NY Daily 5pm EST Close
-9 Pairs Made the Cut
-13 Possible Trade Combinations
-All 4 time frames had profitable setups
-61.5% Hit Rate

Now, if the NY Daily Close Charts are so superior, how come they only account for a 1.5% edge in hit rate, yet in the other system they had a 4% lower hit rate?

Does this sound like massive superiority to you? I didn’t think so.

Although you hear it all the time they are superior, who is backing it up with actual statistics? Nobody……save here.

What was also interesting is many of the pairs others are purporting to be profitable using the inside bar strategy are not – not by a long shot.

What the data simply translates into is that neither one is significantly more profitable than the other. However, it is important to know which pair and time frame is, as many did not match up across the different server times for continued profitability.

Now I did promise to discuss an alternative platform besides MT4 for those that want to stick with the NY Daily Close. First, before I share the platform, I should state why I do not like MT4 for trading;

1) Execution on Market Orders is Slow – so slow that FXCM spent a ton of money and time just to remove the 3rd party bridge and no auto account syncs so that it would execute faster
2) Bulky – not user friendly or flexible unless you can program an EA
3) Have to do more clicks for simple trading operations (i.e. closing multiple positions at once, etc.)

There are many other reasons, but if you do any sort of intra-day trading (1hr charts and below), or market orders, you will find other platforms to be far faster with their execution. Even the MT4 demo platforms can have slower execution then a live order on another platform.

What MT4 is Good For
The only use I have for MT4 is to run my algos which inform me of setups (that I execute on other platforms). For programming EAs, it can definitely be cheaper and simpler, but beyond this, for trading purposes, MT4 is slower and bulkier.

A More Intuitive Platform
For those that want a more user friendly and intuitive platform, I suggest the FXCM TS2 (Trading Station 2) platform. The execution for market orders or any sort of intra-day trading will be far superior and faster than almost any MT4 platform. But even more important, you will have to do less clicks to execute orders.

Case in point, open up a new order tab in MT4 to execute a pending order. Here is the window below;

mt4 new order window dev2ndskies.wpengine.com
Now notice, just to execute a pending order, you have to 1) click on the ‘New Order’ button, 2) select ‘pending order’ from the drop down menu, 3) then choose from 4 types of orders.

Let’s contrast that with the FXCM TS2 process with the window below;

new york daily close charts fxcm pending order window dev2ndskies.wpengine.com
To execute a pending order you simply 1) hit the ‘entry’ order button, and 2) select the ‘buy’ or ‘sell’ button.

Notice the difference?

We are talking 2 steps instead of 3, which when you are trading intra-day, could mean a big difference in execution and getting your price. But also notice which one is more confusing. With MT4, you have 4 order types to choose from, while with FXCM’s TS2, it’s a much simpler ‘buy’ or ‘sell’, regardless of whether its a buy stop or buy limit order – the platform and technology does the work for you.

But for those trading any significant size, or any intra-day price action strategies, execution is critical, and seconds can mean getting your price or missing it.

Trade History On the Charts
One other feature I really enjoy about the TS2 platform is it shows the trades (or trade history) you made in the last 24hrs on the chart, particularly your entry and exit levels. I find this particularly useful for when I’m doing intra-day trades, sometimes I cannot take screenshots of my trade as I’m in several trades at once. When I close the trade, the TS2 charts (Marketscope), will actually show me the entry and exit level on the charts. A good example is below;

GBPJPY price action course trading dev2ndskies.wpengine.com 184 pips

The benefit of this feature allows to me to take screenshots of trades I missed,  then store them for analysis at the end of the trading week so I can isolate patterns behind my winners and losers. But with MT4, these are not available. Once the trade is closed, the entry and exit levels on the chart are gone, which makes for more work.

Although this is a small feature, it’s all these little features that add up to a big result. When it comes to a trading platform, user friendliness is critical, and the more work you have to do to execute a trade, the more time and profits can be wasted.

I hope this article now has conveyed to you 1) the New York Daily Forex Close Charts being superior is a myth, and 2) there is a far superior alternative platform for trading then MT4 which also uses the NY 5pm Close should you wish.

For those wanting to learn which pairs and price action systems are profitable in your server time, then make sure to check out my Price Action Course where you will learn which pairs, time frames, and systems are profitable across specific server times.

Earlier lastweek I wrote a critical article titled ‘5 Things All Forex Traders Must Avoid‘.  I covered some of the more prolific habits and pitfalls all struggling traders consistently fall into. Ironically these are some of the most common things I hear traders talking about when they are wondering why are they not making money in forex.

The good thing is – all of these habits can be changed. With these forex trade tips you certainly can trade profitably, and make a lot of money doing so.

In today’s article, I’m going to cover the 5 points on how to turn your forex trading around by offering the 5 solutions to what all forex traders must avoid.

turning the corner and trade successfully dev2ndskies.wpengine.com

#1 Focus on Opportunities
Behind each obstacle is an opportunity – to grow, to overcome, to profit. The difference between successful traders, and those not profiting is the successful individual sees an obstacle, looks for a way to remedy it, and take advantage of the situation.

If you are constantly thinking about a prior loss, how much you are down, how you don’t have time to fill out your journal, or trade your plan, then shift your focus to the opportunity available. You may just see your energy, focus and trading change.

#2 Focus on Every Aspect of the Game
Can you guess what articles are my most popular? If you guessed about price action strategies – you are correct.

silver price action live trading price action course dev2ndskies.wpengine.com

Can you guess which are the least popular? If you are thinking articles on trading psychology and money management – you are two for two.

To be successful at most endeavors (trading especially), you have to do things outside the norm, because most are not successful. Most are devoting all their time looking at charts, learning about trading strategies, looking for the holy grail, the system that will solve all their problems. Yet most spend less than 5-10% of their time building up their mental capital, their conscious mind and trading mindset.

Perhaps the very reason why you are not trading profitably now, has a direct relationship to where your focus is.  Food for thought.

#3 Focus on Solutions
Don’t have good money management? What is your solution? Don’t deal with the emotions of trading? What is your solution? Having a difficult time sticking to your trading plan? What is your solution?

While almost all those who are having trouble trading are focused on the problems, or things out of their control, those making money and getting better are focused on the solution.

#4 Focus on Process
When I first started training in Archery, I made an effort to focus on the process, the technique, my mindset. I knew if I got the technique right (body alignment, release, follow through, etc.), the arrow was most likely to hit the target. In some Korean schools, they will actually have you focus on the technique for months, before actually firing a single arrow. That is ‘focusing on the process’, and the Korean shooters are some of the best in the world.

focusing on process dev2ndskies.wpengine.com

Instead of focusing on hitting the target all the time and making all this money – focus on following your trading plan, on knowing its strengths and weaknesses, on your mental process.

To become successful at trading – you must focus on the process necessary to achieve your goals. Focusing on results first is both a distraction and mistake.

#5 Protect Your Mental Capital
Do you beat yourself up after a loss or mistake? If so – do you think you are protecting your mental capital? Are you focusing on all the things wrong, do you think this is building a successful trading mindset?

Confidence does not just come from successful results – it comes from the belief you can trade successfully – and this has to be built up and protected.

I hope you enjoyed these 5 solutions to what all traders must avoid, and how to turn your trading around.

Kind Regards,
Chris Capre

Want to turn your trading around and build a successful trading mindset? To learn more forex trade tips – check out our Forex Trading Courses where we teach traders to become profitable.

After working with thousands of trader, along with my 13+ year trading career, I have seen the dozens of pitfalls and traps developing or struggling traders continually fall into, that I myself have fallen into early on, and that separate oneself from trading profitably and consistently.

In this article, I am going to share 5 things all forex traders must avoid, but will wait to hear your responses as to what would be the solution to these traps which most traders fall into.

#1 Focusing on Obstacles
Do you come up with reasons why you cannot be successful? Blame the broker, or number of screens you don’t have, your background, your account balance? Do you come up with justifications why you cannot fill out your trading journal, follow your trading plan, or simply put – be successful at trading?

One thing you must avoid when learning to trade successfully is focusing on obstacles – particularly what is stopping you from trading successfully. Ask yourself how/if you do this in with trading now, and see if you can discover why it may be holding you back.

5 things all forex traders must avoid dev2ndskies.wpengine.com
#2 Focusing Only on Your Sub-Conscious Ability
What is your favorite subject or type of article to read? I’m willing to bet its more often about trading and a particular strategy – perhaps about a price action system, or an ichimoku strategy. How much time do you spend looking at charts, studying systems, looking for systems, setups, and trading methods? Then ask yourself how much time you spend on risk management and your trading mindset?
Focusing on the former is only focusing on your sub-conscious mind, and by itself, no matter how developed it is, or how many hours of screen time you have, cannot lead you to profitability or consistency (by itself).
Ask yourself how much time you dedicate to this in relation to the other aspects of trading.
#3 Focusing on Problems
After a big loss, what do you spend your time thinking about? For the mistakes you make over and over again, where does your thoughts, mind and energy go to? Ask yourself how much time you spend focusing on the problem when it comes to your trading. Ask yourself how much time you spend focusing on what happened (in the past that you cannot change).
#4 Focusing on Outcome
I know, it’s hard not to focus on the results, the profits (or losses), your account balance, your accuracy and overall performance. But ask yourself how much time you spend focusing on the outcome, and what you think that does to your self-image and mindset about trading. How much time do you focus on the result of your trading for the day, on your lack of profits, success, or consistency?
#5 Not Protecting Your Capital – Your Mental Capital
There has been tens of thousands of words written by keyboard and ink about preserving your capital, but what about protecting your mental capital? How much effort and time do you spend protecting your mental capital, your self-image, and your trading mindset? What kind of effect failing to do this has on your mind, your confidence and performance?
In Closing
Take some time to really meditate on these things, how you may be doing some (or all) of them currently, and how they may be affecting your trading. Please do not hesitate to share your experiences around these as well as the info can be valuable for all.
Later this week, I will write a follow up article as to why it’s important to avoid these mistakes, how they impair your performance and growth, and then discuss solutions to avoid making these mistakes in the future.
Looking forward to your comments and thoughts about this.
Kind Regards,
Chris Capre

In this forex order flow video I discuss how to read the price action, order flow and the transitions behind trends or reversals.

price action, order flow and transitions dev2ndskies.wpengine.com

Hello Traders,

I just wanted to share a brief excerpt about the trading mindset, and some of the things I share in the course. One of the things I focus on heavily is helping traders build a successful mindset. Here is an excerpt below about one of the most common pitfalls traders fall into that I hear all the time.
From 3 Guidelines for A Successful Mindset…
“You would not believe how many times a student posts a trade, loses the trade, and the first thing they say is ‘What have I done wrong?’
First off, why does losing a trade, in your mind = doing something wrong? Did you expect the system to work perfectly every time? I don’t think any of you really expected a system to work perfectly, so the question is indicative of something else…an idea in your mind that you did something wrong if it (the trade) did not work out.
Anytime you see or hear this, you have to be clued in immediately why you think you did something wrong because you lost a trade?
The answer lies in your self-image – the part of you that has an idea of what you are like (successful, hard working, enthusiastic, lazy, stupid, optimistic, pessimistic, abundant, poor, not fit to be a trader…etc). This is how you view your self – and this question ‘what did I do wrong’ is actually coming from this place – that part of you that believes you did something wrong because you lost.
There is an idea that if you only focus on your mistakes, you will become successful. Although it’s true you need to plug the leaks – you don’t get there by focusing on what you did incorrectly.
So a tool to combat this is to build the neural pathways to making better trades, and there are many ways to do this.”
trading mindest successful trader psychology dev2ndskies.wpengine.com
This is just a brief excerpt in our courses from our trading mindset and performance enhancing section in the course, where I teach and offer tools, techniques, and methods to build a successful trading mindset.
I hope you enjoyed this small piece here, and will use this to look into your self-image, your trading mindset, and what you can do to build the neural pathways to trade successfully.
Kind Regards,
Chris Capre


Today’s article is going to discuss and dispel the 50% retracement entry myth on the pin bar strategy. The goal today is to talk about why this entry by itself is a complete misunderstanding of price action, order flow, and the pattern itself.

During this article, I will share two key points on why this is a sophomore entry on this commonly used pattern, how you can find a more optimum entry, and what you should be looking for.

Key Pin Bar Point #1

By itself – the 50% retracement entry is a completely arbitrary method. For those of you unfamiliar with this pin bar forex trading strategy, the idea is to take a fib-retracement of the pinbar itself, and enter on a 50% pullback into it.

Pin bars do not have some magical retracement level institutions and bank traders are looking at for getting into the pattern. The real power of the pattern is in both the trap and rejection of the price action.

Looking at the chart below on the 4hr Gold chart, we can the pin bar at the top of the chart marked A, and how its body and tail stick out of the prior bars (A’) high & close. When the price breaks the high of the first bar (A’), this brings in new intra-day breakout trend traders to get long.

Now the tail and wick of the pin is formed by sellers rejecting the bulls advance, and reversing their gains intra-day.pin bar forex trading strategy the 50% retracement myth dev2ndskies.wpengine.com, forex trading strategies that work
Once the market breaks below the highs of A’, this “traps” and stops out those bulls who got long on a breakout of A’. This trap forces them to cover their longs with shorts, thus fueling the sell side even further.  But a few details have to be pulled out of this chart first.

  1. The highs of A’ are at the open of the next candle
  2. The close of the pin bar A is parked on a 38.2% fib retracement
  3. Neither of the above line up with a 50% retracement, so taking a long at the 50% retracement is completely arbitrary, and ignores the most recent price action

Now in relation to the first bar after the pin (B), we can see it never makes it to the 50% retracement, and stops right on the 38.2% level which was the most logical conclusion, as that is where the more active order flow was.

Taking a more detailed look with the 1hr chart below, we are looking at the same intra-day price action from the chart above, but with a little more detail using the 1hr chart.

Now the numbers 1-4, represent the 4hrs in the pin bar from the first chart. Even looking at this chart, do you see where the more dominant price action formed? You should be seeing it at the 38.2% fib retracement.

We can easily see this as the high of 1, the open and close of 2 and 3, the entire body of 4, along with the highs of 5, 6 and 7.pin bar intra-day price action trading strategy 50 percent retracement myth dev2ndskies.wpengine.com

So as you can see, the 50% level has no meaning here, and is thus irrelevant as it ignores the most recent (and thus most important) price action.

Even the bars 9 and 10, blow right past the 50% retracement without even looking, and touch the close/open of bars 2 and 3.

This illustrates why the 50% retracement entry is a complete myth, and a sophomore understanding of both the pin bar, and how price action works. Thus, basing your entry on such an arbitrary play makes no sense and at all, and completely ignores what price action is about.

Key Pin Bar Point #2

If it’s not obvious by now, what you should be doing is basing your pin bar entry on the most recent price action around the pin bar.

This would mean using the prior bar at a minimum, along with the pins high, low, open and close.

The most ideal entry is not some arbitrary 50% retracement, but the actual high/low of the pin bar, or where the nearest key level comes in at.

Before all this, you need to understand price action context first.

Are we in a trend, or in a range? The difference between the two can have a significant impact on your entry.

From here, after you have assessed all this, you can see get a good gauge of where to place your entry.

Using another example from a proponent of the 50% retracement entry, the EURUSD recently formed a pin bar on the daily chart. The suggestion was to get short on a 50% retracement. Below is the daily chart of the EURUSD, and the projected entry.pin bar strategy the 50% retracement myth price action dev2ndskies.wpengine.com
Now first thing we have to do is ask ourselves what kind of price action environment are we in? 

Are we in a trend or a range? It should be obvious we are in a range. Thus the golden rules apply, that when in a trend, trade it like a trend, and when in a range, trade it like a range.

Now using this chart above, we can see the range outlined by the box.

The pin bar is marked A, and the fib levels are 1, 2 and 3, for 38.2, 50, and 61.8% retracement levels. Now, although there is some decent price action around both the 38.2%, and the 50% retracement levels, the bottom line is we are in a range – so selling at the arbitrary 50% level  is selling in the middle of a range!

Do you really want to sell in the middle of a range? I didn’t think so.

If you really look at this chart,  you will notice a ton of rejections around the key resistance level line at B, so your minimal entry should be to get short at B. But, since its a range, we don’t want to consider getting short till the upper regions of the range.

This would mean the pin bar high at a minimum. The more premium entries would be above this in the last 10-15 pips (i.e. upper end of the range).

So hopefully you can see how the 50% retracement entry is not only arbitrary, but a complete myth, and a huge misunderstanding of price action and the pin bar.

Going for a 50% retrace entry each time will get you a retail traders entry, not a professional one.

What we need to be doing as traders is

  1. Knowing what environment we are in
  2. Looking at the most recent price action, and
  3. Then determining our entry and how to trade the price action.

But, it has to be asked what was the end result of this 50% play?

The Euro naturally went above the pin bars top, stopping just under the range high, and thus stopping out those who entered on the 50% entry.

In Summary

When you breakdown this arbitrary entry method to trading the pin bar, and start really paying attention to the most recent price action context, along with how PA really works, you will begin get a better understanding of how to trade both pin bars, and price action as a whole.

This skill works for any pattern, environment, pair, time frame, or instrument.

Thus, I hope you found this article both challenging & provocative, but more importantly – insightful on how to trade pin bars, and price action as a whole.