This is the checklist I use to analyze, plan and execute my trades on coins and forex pairs.
It can be summarized in the mnemonic word TAEST.
It is comprised of the following elements:
(T)rend direction
(A)reas of contact
(E)ntry trigger
(S)top loss
(T)ake profit level
Let’s go through them one by one.
(T)rend direction:
The first thing to to do it to look at the chart to determine the market structure of the asset and see if it is trending up, down, or sideways.
Do this on the Weekly, Daily and 4-Hourly timeframes to get a solid idea of how it is trending.
We are only interested in the 4-hourly timeframe though, and we want it to either be trending up, or down. we don’t trade sideways markets.
One other condition that needs to be met is that the 200EMA must be under the price, and needs to be sloping in the same direction as the price, so if the price is trending up, the 200EMA needs to be sloping upwards, if down, downwards.
Below is a good example of how the trend and the 200EMA should look like:
If the 200EMA is piercing through the price or is sloping sideways, stop right there, and move on to analyzing another asset.
Do not consider entering trades nor continuing your analysis if the trend is sideways and the 200EMA is piercing through the price like so:
(A)rea of contact:
An area of contact can be one of the following:
- Key support or resistance level
- Recent swing high/low
- Trend line
- Fibonacci retracement level
- Moving average such as the 50MA
Here, You need to do some prep work before you continue.
Go through the Monthly, Weekly, Daily, and 4-hourly timeframes and draw the key levels on the chart.
The key levels are major support and resistance lines, and trend lines.
You should end up with something like this:
A small advice, color-code the levels you draw by timeframe, for example, draw the ones you found on the monthly in red, the ones you found on the weekly in orange, the ones you found on the daily in green, and the ones you found on the 4-hourly in blue. this way you don’t have to zoom out all the time to know what is what. This is because the higher the timeframe is, the more important the key level you found is.
The next thing is to go to the 4-hourly timeframe and mark the pivot points on the chart, like this:
If you have a difficulty locating the pivot points, I suggest you use an indicator called Pivot point high low on Tradingview.
Once you have drawn the key support and resistance levels, the trend lines and have located the pivot points, your chart is now ready for analysis.
The next step is put you asset on the stand-by list and wait for a Push-Exhaustion scenario to happen towards one of the key levels.
A push exhaustion scenario is when in an up-trending market, the price is pushing up, and then retraces to an area of contact such as shown below:
The same scenario but reversed in a down-trending market ( pushes down then retraces upwards to an area of contact).
Here’s a real-life push exhaustion scenario from CROUSD on November 17th 2021 where the price pushed and retraced to the Fibonacci 0.618 level:
Here is another example from SANDUSD where the price pushed up and retraced to the 50MA:
Here is a third example from ETHUSD where the price pushed and retraced to a key support/resistance level:
And one last example from EURUSD where the price pushed and retraced down to the trend line:
(E)ntry trigger:
Now that you located an asset that is trending and made a Push Exhaustion scenario on an area of contact, the third step is to wait for the price to interact with that area and bounce from it completing the Push-Exhaustion-Push sequence.
For example, in an up-trending market, when the price finishes interacting with the area of contact and is ready to bounce from it, it will give us a bullish engulfing candle and one other green candle (bearish engulfing candle and one red candle if trending down).
When we see the bullish engulfing candle and the green candle after it, this is our Entry trigger.
The next step is to see where to put our stop loss.
(S)top loss:
There are 2 common strategies for placing your stop loss.
The first strategy is to place it a bit under the area of contact, and the second one is to retract 1ATR from the price and place it there.
side note: ATR means the average true range, find this indicator on Tradingview and use it to get the value.
Either of these strategies is good, I myself use the first one.
What we really want here is for the price to go our way as soon as we enter. If it start messing around, we want to be stopped out and move on to something else.
Here is an example of where to put a stop loss in case of a Fibonacci retracement area of contact.
(T)ake profit level:
Your take-profit level is Always going to be the next area of contact on the chart*.
There will often be more than one available, choose the one that comes first.
*refer to the area of contact section to find out which ones I mean.
There is one more area of contact I did not talk about, it is the Fibonacci Extension.
The Fibonacci extension is a tool used to draw your take profit area of contact.
So, in short, whenever you want to see where all your potential take-profit levels are going to be, you need to draw the Fibonacci extension on your chart, and see which area of contact comes first.
If for example the price made a most recent swing high and you drew Fibonacci extension but the most recent swing high comes first, then that one is your take-profit level.
In cases where the price is making a new ATH (All time high), the Fibonacci extension will be your take profit level.
The Fibonacci extension gives you several levels to take your profit, but the most common ones are the 78% and the 100%.
I have seen in some instances where the price kept on going to reach the 200% Fib extension, so what do we do in such scenarios?
The answer is Stop loss trailing.
When the price arrives to your take profit target (whichever it is, whether the most recent swing high, Fib extension, key support/resistance level etc..), you can sit behind your monitor and raise your stop loss level to just under it, and keep raising along with the price until it stops you out.
For more info about this subject, take this Youtube tutorial on trailing stop losses, but the main idea is to raise the stop loss with the price, that’s it.
One more thing about setting your take profit level, if your take-profit price or right under it, there is a round number such as 1$, 1.25$,100$ , then put your take profit under that level instead, this is because round numbers are an attractive area for traders to set their take-profit levels, and they all do it, that causes a massive dump when the price hits that number. When that happens and you have also put your take-profit level there, there will be a good chance your order will not be filled, and/or suffer from slippage because too many sell orders triggered at the same time for the market to absorb.
Last but not least:
- Always stay one step ahead of other traders.
- Demo trade until you are confident and know what you are doing before trading with real money.
Thank you for reading this, I hope it was helpful.