I know that a lot of people use this validation to en enter the market after a pinbar (buy or sell when the price is higher or lower than the pinbar)
I have made my own study and monitoring and i can promise if you enter pinbar with this validation, you will loose a lot of money.
For me, i take Pinbar as a psychological factor.
Pinbar can mean 2 things
-The market doesn't know where to go
-we are in reversal movement (reversal as a candlestick point of vu, that's not always mean trend reversal)
If you enter the market when price doesn't know where to go, you loose money
if you enter the market when it's a reversal, you win money
How to find if we are in reversal movement?
We have 2 factors
- After a pin bar we want to see price going in our direction with momentum force
- the second factor is time, you have to wait to see if it keep going in our way. (i usely wait 15 to 36h hours after daily Pinbar.
I know that a lot of people will view this as a late entry. For me, it's better to be late in the good train than early in a bad train.
Time is your best friend with Pinbar.
A lot of pinbar create a big momentum and finaly make zig zag (if you enter here, you are in the wrong train)
Interesting stuff that does not get enough discussion on this site, in my opinion. You are right that some would consider that a late entry, as the R:R is lower the way you do it, but presumably you have a pretty high percentage of winning trades? Whereas with a more aggressive entry, at the break of the bar or even earlier, would lead to more trades hitting you SL but give a better R:R on the winning trades. Neither argument is 'right', as such, it is simply a matter of individual trader personality.
This is a balance that I am kicking around at the moment in my own trading, some of which is based around Daily PA.
So I am following this thread with interest. Thanks for posting. Toulouse is lovely, by the way - reminds me of family holidays and school trips as a kid!