Bermaui Pin Bars Formula

Welcome the Bermaui Pin Bars Indicator (BPB)

BPB is a unique combination between the famous price action Pin Bars pattern, Bermaui Bands and a Multi Time Frame Candle Direction Panel. In this article I will focus on Pin Bars.

What is Pin Bars

Pin Bars is a shortcut for "Pinocchio Bars" which is a classic bar pattern alternative to Japanese candlesticks with tall upper or lower shadows and very small bodies like Hammer, Inverted-Hammer, Hanging Man, Shooting Star, Dragon Fly Doji or Grave Stone Doji.

The first time I read this word was in Martin Pring famous book "Technical Analysis Explained". He mentioned a kind of a false breakout pattern for support and resistance that consist of one bar, called "Pinocchio Bars".

By definition the bar charts consist of three prices, which are "High, Low & Close. The American technical analysis school didn't know about the open price and Charles Dow saw that the close price is the most important price after all. So, the Pinocchio Bar can be built from high, low and close prices, where the close price gets too close to the high or the low. This form a bar with a long tail to the up or to the down.

When this one bar pattern penetrates an important support, resistance or a trend line it looks like a false breakout or a trap that might lead to a wrong buy or sell decision.

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When candlesticks appeared in the field of technical analysis it made a lot of noise, because they make charts more clear and give their readers more information by adding just one piece of prices which is the open's price.

Candlesticks is more colorful and contain more patterns. With candlesticks the Pinocchio bar pattern is converted to Hammer, Inverted-Hammer, Hanging Man, Shooting Star, Dragon Fly Doji or Grave Stone Doji and more. Most of those patterns are reversal by definition.

In our days most traders like to group all candlesticks with tall shadows, wicks or tails under one name which is "Pin Bar".

Bermaui Pin Bar Equation

Of course you may think that it will be easy to build a tool that can detect pin bars on your chart, because it is a small pattern that consist from one bar, but in reality when you scan the internet searching about a good quality piece of a code that can do the job you won't find any. All codes their miss something and that is why they have parameters to help detecting the pattern, while our eyes can find the pattern easily without any parameters or calculations.

The reason for this problem is that when most coders try to program a code to detect the pin bars, they concentrate on the relation between the body of the candle and its range, but what I did is different, because I concentrated on the relation between the center of the body and the range.

There is a simple fact about candlesticks which say that the body of the candle stay between the distance from the high to the low. It can't go higher or lower. Also, if the center of the body moves to the upside or to the downside and gets closer to the high or the low of the candlestick, then the body must shrink in size.

Depending on this fact I built my equation to find the center of the body and, where it is from the range of the candlestick. With this simple equation I was able to find pin bars easily despite of the candlestick range and without any parameters.

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The equation will find the pin bar and the indicator will draw it on the chart. If the open is lower than the close, then the candlestick is bullish and colored with green. If the open is higher than the close, the candlestick is bearish and colored with red.

Of course, a green candle with a long tail to the downside will look more bullish than a green candle with a long tail to the upside. Also, a red candle with a tall upside tail is more bearish than a red candle with a tall downside trail.

Also, the location of the candles from the current trend is important. If a bullish pin bar appears at the end of a down trend it may lead to reversal and if a bearish pin bar appears at the end of an uptrend it may be the end of this trend.

I hope you can find this article about Bermaui Pin Bars good for you.

If you have any question send it to me and I will answer as soon as I am online. I wish all of you happy trading with Bermaui Pin Bars.

Muhammad Al Bermaui, CMT