Price Action Mistake 1: Assuming all pin bars are the same

Many traders consider pin bars to be a sign that the market is likely to reverse. That is true but not enough. The pin bar can be a sign of a reversal, but it can also be formed by bank traders locking in their positions for a profit.

For example:

Many novice traders will believe that the bearish pin bar above is a sign of a market reversal, because the price after rising was rejected, causing it to fall and close below. These traders will have faith that all pin bars are the same, and sell blindly behind the pin bar above.

The problem here is that this pin bar was not created by traders with the intention of causing the market to reverse. It's because Bank traders take profits on their long positions that are profitable after the previous rally.

If you are still in doubt, before this pin bar we see a very large bullish candlestick, such a strong move has certainly brought a lot of profit to the Bank traders who bought before. So what will they do? The most likely is to take profits to be able to buy more, from which their profit taking action created a pin bar behind.

Price Action Mistake 2: Assuming 1 higher high/1 lower low is confirmation of a trend reversal

Many traders believe that in an uptrend, if there is a lower low, there has been a reversal to the downside. Similarly in a downtrend, if there is a higher high, it has reversed to the upside. That is a fatal mistake.

According to professional price action trader Lance Beggs: “An uptrend only reverses if and only if the bottom leading to the highest high is broken and closed below. a downtrend only reverses if and only if the high leading to the highest bottom is broken and closed above”.

For example:

EURUSD has a break and close below the bottom leading to the highest high, the uptrend has reversed to bearish.

AUDUSD makes a lower low but hasn't broken the bottom to the high, so there is still an uptrend.

Price Action Mistake 3: Not daring to trade against the larger trend

Many price action traders believe that only trading in the direction of the trend on a larger timeframe will give an advantage. But to do so is only to pass up profit opportunities.

For example:

Bullish pullback waves on D1 are all good buying opportunities on H4, H1 or lower frames.