Jarroo: pullback from levels

Each trader has his/her own trading system. Even using existing standard strategies traders always add something new; it can be indicators or levels. However, there are strategies where indicators are not used at all. Some traders think that such strategies only distort information and prevent seeing the whole picture. We will talk about one of such strategies in this article and this will be a Jarroo strategy.

 

Strategy basics

Jarroo: pullback from levels

Jarroo strategy is based on the daily timeframe, so the formation of a clear signal may take long time. We know that there are always strong levels in the market, which are difficult to break down.

The price can repeatedly test them but continue to pull back. If the price breaks down this level, probability that it will continue to move in the chosen direction will highly increase. Jarroo strategy is based on breaking down the strong levels. However, before starting to search signals, a trader shall implement several important steps.

Step 1: superficial search

Jarroo: pullback from levels

Determining strong levels is quite easy, we just need to reduce a chart and see the peaks and dips or the points where the price has previously reversed.
For convenience, on the chart above, these zones are marked with lines of different colors: red lines show the lows of the price and white line indicate the highs.
Since Jarroo strategy is used for trading on a daily chart, we will not analyze many of these zones. It will be sufficient to determine a few nearest levels, which the price can approach in the near future.

Stage 2: Layout of levels

The example shows that the price has repeatedly tested the lower level displayed as the red line, but failed to break it down.

According to the strategy, layout the lines is based on two or three adjacent candlesticks, the lower levels of which coincide with accuracy of less than five points. In our example it happens three times and in fact, we could have put three lines. However we will put just one line at the lowest level in order not to overload the chart.

We will do the same with all the levels built during the first stage. In the above example, we have 4 of them: two on peaks and two on dips.

 

Market entry

Jarroo: pullback from levels

According to Jarroo strategy we will place pending orders. In the example above we can see that at the current moment the price is testing the strong level. Over a short period of time (within the daily timeframe), this is the second attempt, which means that soon we may get a sell signal.

In order to get a signal, the price shall break down a strong level. After breaking down a trader can place a pending order, in our case it will be an order to sell. The size of the pending order is calculated on the basis of the size of the candlestick, which carried out the breakdown. That is, we take opening price of this candlestick and subtracted this value from the current level of the price. Then we add the result to the price of the penetrated level and place a sell order.

Now, we have to wait. But always remember to place stop-loss order at the level of the opening price of the previous white candlestick. In our example, this level will almost coincide with the upper level, which may indicate that the price is locked in the channel between the levels and may break down in either direction.
Take-profit is placed in accordance with money management rules. It is important that it shall be at least twice as high as the stop-loss level.
 

Jarroo: pullback from levels
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