Today we are going to discuss the strategy known as the “Jaroo method”. It is a Price Action-based strategy having interesting features. It has its method of determining the key levels, and also simplified entries to the market and the sensible determination of the short-term goals. Even if you make good money out of classic Price Action, I do advise you to pay attention to this trading system.
The list of the terms used in the system:
LCS = lowest close of support. The level, below which the price failed to close.
HCR = highest close of resistance. The level, above which the price failed to close
PBT&CA = price breaks through & closes above. The price breaks through the level and closes above it.
PBT&CB = price breaks through & closes below. The price breaks through the level and closes below it.
DCC = Daily Close Confirmation
Table of Contents
Charting the Levels
The Jaroo Method implies a slightly different way of determining the levels:
- First, you should find the swings (the local price minimum and maximum). That is the beginning and the end of the price movements that can be noticed by the unaided eye. If the swing doesn’t catch the eye, then it is not a swing.
- Mark only the levels that fall on the maximum and minimum points, that is, those having at least two candlesticks of the same opening/closing.
- Pay attention that you should draw the levels of this trading system by the opening/closing points.
After the price has broken through the level and closed either above it (for buying) or below it (for selling), you should set a pending buy/sell order.
Goals and the Stop-Loss Orders
- Set the stop-loss order beyond the opposite Low / High point of the breakout candlestick. If it is too close to the level, set the stop loss order behind High / Low of the previous candlestick. If the breakout candlestick is very large, set the stop loss order beyond the level.
- To set the Take Profit order, you shall use the nearest support/resistance levels, the stop-loss orders level multiplied by 2 or 3, or the shadows of the previous candlesticks.
Tips and details
- You should apply the same Money Management as in the case of Price Action, which is 1-2% per trade. You may use a special application to calculate the lot.
- After you achieve the first goal or the profit equal to two stop-loss orders, transfer the position in the black.
- If the candlestick closes above/below the level (against our position), on which you entered into the transaction, do not wait for the stop loss order and exit right away.
- Use the DCC rule (Daily Close Confirmation):
You can use the following technique for more conservative entries. After the signal breakout candlestick is formed, you do not set a pending order but you should wait for another candlestick. And only in case the candlestick coming after the signal bar closes above/below the level (that is, it doesn’t break it out in the opposite direction), you may set a pending order.
The Jarrow Method trading system is suitable mostly for those who consider the classic Price Action too complicated. However, traders using other strategies may also derive benefit from this technique of level charting and determining goals basing on the shadows of the previous candlesticks.