Pattern consists of one price bar and represents rejection of the price. Let’s imagine you are at the market – people came to by apples. All sellers know it and are trying to sell as high as possible and each sale makes them to offer higher prices. But buyers are not ready to buy at such high prices and sellers lower their prices to sell at ‘highest possible’ till there are some buyers left. Other words, price rejected and our pin bar formed.
Pin bar can be used as sign of trend continuation, as reversal signal. But as most of you are beginners, you have to remember that best of all it works as indicator of trend continuation or other words pin bar indicates that pullback is over. You can also use it as reversal signal at key resistance levels, but if trend is very strong, pin bar can give false signals – in 2017 a lot of such signals you could see in Dow 30.
Any way, pin bar is a good pattern, but it has to be only a part of your analysis. Never take decisions only based on patterns.