Jasmy Trading Plan and EducationHello Traders,
Today I wanted to discuss being prepared prior to making a trade. It is quite often I see people asking what to buy but, rarer that people are interested in when to buy or what to do after. Finding a good asset is only half of the battle, knowing when to buy and where to take profits are just as important as what to buy.
Here I have put together a trading plan for the asset Jasmy. What I first noticed about this asset was, the potential declining channel as labeled on the chart. A declining channel is generally a bullish indication that market participants have been selling and buying in a manor that presents this bullish consolidation. Once I have identified market structure on a higher timeframe as I have in this daily chart, I find it helpful to zoom in on smaller time frames and check my indicators for signs that prove my theory as well as signs that disprove my theory as to keep an unbiased opinion, making for a better decision with my potential investment.
Step 1: Labeled in White
Let the chart tell the story, not your emotions! One thing I will often look for is bullish divergence on both the MACD (which my favorite is finding it on the histogram as this seems to be the most accurate to read imo) and the RSI. Other things I will look for is a cross or impending cross of the MACD line over the signal line on the MACD indicator as well as a cross of the signal line over the zero line on the histogram. If you notice on the chart I have labeled both of these for you with arrows pointing to the histogram as well as the MACD line crossing up giving a bullish signal to buy. You can also see the blue line indicating the bullish divergence that I drew on the MACD Histogram which are the green and red vertical bars also labeled on the and pointed out on the MACD indicator. Lastly the oversold RSI bouncing off of the 20 line. These are a few indications that the downtrend may be completed and that the declining channel may be breaking upward.
Here is a labeling of the MACD for further understanding of the indicator.
Step 2: Labeled In Yellow
Now lets get to the structure breakout. As you can see, I have clearly labeled the declining channel and placed an area of breakout shown with a green arrow pointing to it so you can easily identify the price action coming out of the channel. What you want to look for is exactly what is happening now with the current days price action popping out into the small channel that is labeled in green. This is a good buy area.
Step 3: Labeled in Green
Now you will need to set your target. First you will take your measuring tool out from the measurement tool section and measure the length of the top to the bottom of the channel. You can also just draw a line from the top to the bottom of the channel. After you do this, right click and make a clone of the measurement. Now, it is important to find the breakout of the channel and place the bottom of the clone where the price action breaks out. Since we already have price action in the breakout area you can place the measurement at that area.
Step 4: Labeled in Teal
Now it is time to find the best entry points for your trade. I generally enter with 50% of my allocated trade amount at first. My allocated amount is generally 3%-%5 of my overall holding amount in that account. I enter with half as sometimes you will see a false breakout that will come back in the channel and you are able to enter with a better position before the actual breakout. With this I like to add another buy box at the bottom of the channel just in case the price action gives me this opportunity. If a clear breakout and retest present itself I will enter the other 50% of my position.
Step 5: Labeled in Pink
Place your stop loss underneath the last swing low before the bullish breakout of the channel.
