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Price Action Strategy: Method Jarroo
2021-12-16 • Updated
Information is not investment advice
This article describes the strategy known as ‘Method Jarroo’. It is based on the concept of price action but with some unique features. Are you interested? Then, let’s explore this strategy!
Define key levels
- Identify swings. Find the local minimum and maximum levels of the price movement. They should be eye-catching.
- Then, draw the horizontal lines through the levels which lie at the local highs and lows. There should be at least two candles that close/open near these levels.
The levels above the price will be called resistance levels, below – support levels.
- After the candlestick breaks the resistance level and closes above it, we consider opening the pending order for buying.
- After the candlestick breaks the support level and closes below it, we consider opening the pending order for selling.
If you forgot or don’t know what pending orders are, read our article with a clear explanation called “Traders’ secret weapon: pending orders”.
- Place Stop Loss below the low of the candle that broke the resistance
- Place Stop Loss above the high of the candle that broke the support
If the candle is too large, you can place the Stop Loss just slightly below resistance / above the support level.
To place Take Profit, you’ll need to find the nearest levels of support and resistance as well. It should be greater than the Stop Loss by 2 or 3 times. For example, if you put the Stop Loss 30 pips higher than the current price level, you should consider placing Take Profit 90 pips lower than the current price.
According to risk management rules, a trader should use no more than 1-2% of the deposit to open one order. Besides, there is a more conservative way to use this strategy. After the signal candle appears and breaks the support/resistance level, a trader shouldn’t open the pending order as written above. Instead, he/she should wait for the next candlestick to occur in the chart. Then, if this next candlestick doesn’t break the critical level back, a trader should place a pending order.
Great! You’ve just learned a pretty hard strategy! If you want to try it, use the Demo account!
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