You can see the green dashed line and then price rockets to resistance. The breakout candlestick must breakout to the downside and close below point. Summary The 1 2 3 trading strategy is a pure price action trading method that uses a sound approach to trading. If youve ever thought about taking your trading to another level or looking for another stream of income, download the Options Breakthroughs for some solid trading information. The breakout that occurs is driven by traders who went long at the bottom of the range.
123, chart Pattern, forex
Price find support at #2 (inside the previous consolidation pattern from trade #1) and shows strength as it rallied to #2. Your stop loss should be below #2 with buffer room to allow for noise. If you enjoyed and liked this forex trading strategy, please dont forget to share by clicking those sharing buttons below. But traders who positioned lower will also look for scalping Forex trades at the top of the range is that not how you play a range? The average true range stop for this trade would actually be in the middle of the candlestick that printed just before the breakout candlestick. When price breaks the point 2 support level, it indicates that the market is most likely to continue downward. 123 Trading Plan, trade Setup. As discussed, you can enter at the close of the break out candlestick (signal candlestick) or entering your trading position at a break of the high. This price point is the level at which the corrective move completes and the price reversal to the upside begins. Point 1 is the lowest low point, forms a support level. You must have a proper risk protocol as part of your trading plan. Price cant break lows so traders go into range trading mode The formation of this smaller range allows traders to position with a tighter stop loss just under the small range.
Read Inside Bar Forex Trading Strategy-Learn How to Trade Inside Bar 1 2 3 Chart Pattern By The Numbers. You can use legs 1-23-4 which suits the 123 forex strategy pdf 1 2 3 trading strategy. You can see the first two trades nailed the targets. Lets see some detail in this chart Price could not rally far from the low which is showing the 1 2 3 chart pattern the stair stepping in a trend is under attack. Place a buy stop pending order 1-2 pips above high of breakout candlestick place your stop loss 5-10 pips below the low of the breakout candlestick. Point 2 will be the peak or the highest point, forms a level that we consider as potential resistance. In my own trading and in my years as a trader, I look to simplify. The break out then occurs after that pullback.
Trading, strategy, how To Trade The 123, pattern
We DO NOT want to see price retrace all the way to the price at #1. If you dont want to wait for the breakout candlestick, then you can place your sell stop/buy stop pending order 2 pips below/above the point. Point 3 will be the 2nd low point, a 123 forex strategy pdf support level ( which must be higher that the point 1 which is the lowest low point ). In a downtrend market, the 1 2 3 chart pattern forms when: Point 1 becomes the highest peak when price finds resistance and moves down. Some would think the first break would carry more weight because the drive started midway in the range. The 123 chart pattern can be used in both the uptrend and downtrend market. The 123 Chart Pattern, forex Trading Strategy is a price action trading strategy based on the 123 chart pattern. You can also see that the 1 2 3 trading strategy is taking advantage of the stair step nature of the market that is needed if a trend is going to continue. We have most variables need for the 1 2 3 trading strategy but price is forming a range near the level at #3. Trading Strategy Trading Plan, lets take a look at a potential trading method to trade the 1 2 3 trading strategy. That is not conducive to a sustained break of resistance. This is either traders positioning short in the range or the longs taking profits.
New forex traders may find identifying the 123 pattern difficult at first. Stop Loss, Take profit. This acts as short term potential resistance. For take profit, you can calculate it based on 1:3 risk to reward or use a previous swing high as your take profit target level. These two charts below show the difference between the 123 chart pattern in a downtrend and an uptrend. As a trader for years, I have seen the following occur: Price trends nicely Weakness shows up in this fashion Traders will take another run to the upside, break #2 and then see this fail back inside This formation. Yes. A very easy price action trading system with really simple trading rules. For take profit, you can calculate it based on 1:3 risk to reward or use a previous swing low as your take profit target level. No trading indicators are required although I do suggest the ATR for stop loss placement. Price breaks above #2 and you can either enter at the breakout or, my preference, take a position at the close of the candlestick to confirm a true break. In an uptrend market situation, price will make 3 points. Point 2 becomes the lowest low point (forms support) and price moves.
One to One Targets I color coded each swing so you can see where I am measuring from. Entering at close or breaks of support levels 123 forex strategy pdf or resistance levels (highs and lows of breakout candlesticks) is my favored entry Taking Your Profits Some traders would like to see specific price targets to add to their trading plan. Other traders see the power of trailing their stop loss to take as much as the market is willing to give. Finds another resistance at point. You can also put an order to buy slightly above the candlestick that broke the #2 level. That is NOT something we want to see for a clean 1 2 3 chart pattern. Trade Setup 2, price rallies from #1 and gives us a strong reversal candlestick at #2.
Learn The Powerful 123
Table Of Contents, how does a 123 pattern form in a downtrend and uptrend market? My friends over at Netpicks want to invite you to download their Options Breakthroughs for free. Trade Setup 3 Each trader should understand this pattern by now so lets focus on the range that is occurring. When price surpasses the price at #2, the trader can use that as confirmation that the 1 2 3 chart pattern is present. Place a sell stop pending order 1-2 pips above low of breakout candlestick place your stop loss 5-10 pips above the high of the breakout candlestick.
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