123 Method by lgtj

Hello FF community. I want to start a new thread based on two e-books that has changed my trading experience. If you've read my first thread "Weekly Trend Trading Method", you'll know that I only trade the higher time frames. The trend is established on the higher time frames, so that's where I want to be. For those of you who have a full-time day job and a family like me, then this method is for you. If you are a scalper, then you're on the wrong thread because entries will only be taken on the 4H and Daily time frames. The key to this method is PATIENCE, PATIENCE, and MORE PATIENCE. Ok, let's move on.

Pairs: Eurusd, Gbpusd, Audusd, Usdchf, Usdjpy, Eurjpy, Gbpjpy

Time Frame: 4H, Daily

Indicators:
21 sma, set to close
200 ema, set to close
Fractals
newmcad 12,26,9

Here are the e-books and newmacd

Your chart should look like this.


Here's a live chart of eurusd

I'll explain the rules in upcoming posts. I have to go for now.

Ok, I'm back. First, we must establish whether the macd is in buy or sell mode. I like to start with the Monthly chart first and then the weekly and daily. I'll use audusd for my examples.

Buy and sell modes.

Buy mode

Buy mode

Buy mode

Now we must locate the 123 pattern on the weekly time frame after the buy or sell mode has been established. Then I plot my fib from point 1 to point 2 on the weekly chart and monitor the retracement to the 50% fib level on the daily chart. This is where Patience is needed.

Weekly

Daily

Once the retracement has occurred and has gone into sell mode, now we must wait for the macd to get back into buy mode before we make an entry. Again, patience is needed.


I must go again. I'll be back to cover entries and exits later. Tell me what you think so for.

Here is a indicator made by funyoo.

good method, thanks for sharing

Welcome guernica and thanks for your your contribution.

Welcome and thanks for your comment.

Lets talk about entries and stops. There are three entries that I use. First, the early entry. Second, the conservative entry. Third, the add-on entry. These entries will be taken on the 4H and daily time frames. Let's look at some examples.

1) The early entry is when the macd has gone back into buy or sell mode after the retracement to the 50% fib level. Enter your order at the open of the next candle. The stop will be placed at the previous fractal swing low/high or in the area of the 50% fib level.

2) The conservative entry is when price has broken point 2 in the 123 pattern. Your entry should be 1 pip above/below point 2. Your stop can be placed 1 pip above/below point 3 or above/below a previous resistance/support level. It's up to you.

3) The add-on entry is when an inside bar is formed. The 21sma must be going with the trend and the macd must be in buy/sell mode with the trend. Place your entry 5 pips above/below the inside bar and your stop above/below a previous resistance/support level or a previous fractal swing high/low. It's up to you.

I've numbered the entries on the chart below.

If price does below the 50% level, is the trade off?

If not, how low can it go?

Let's talk about exits. According to the e-books, whatever the calculated distance is between points 2 and 3, that figure should be the same amount for our target. For example, if the distance between 2 and 3 is 300 pips, then our target is 300 pips from point 2 in the 123 pattern. In addition to this, the early and add-on entries would be closed at the 300 pip mark also. Let's look at the chart for example. As you can see, the TP level is about to be reached.

1) Early entry at .90816 exit at .96712 = 589 pips
2) Conservative entry at .92212 exit at .96712 = 450 pips
3) Add-on entry at .94336 exit at .96712 = 237 pips
Total amount of pips is 1276

Hello Bill and thanks for your question. If price goes below the 50% fib level, I wouldn't consider the trade to be off unless price continues to fall and break major support levels and round numbers under the 50% fib level.

Let's talk about entries on the 4H time frame. For the 4H entries, I would plot my fib tool on points 1 and 2 on the daily time frame as long as it's with the weekly trend. As long as the macd's are in agreement, then I would pull the trigger. Let's look at a live chart of Usdchf.

1) I plotted my fib tool on the daily chart after looking at the weekly chart for confirmation.
2) When price retraced, I dropped down to the 4H chart and waited for my entry.
3) When the 4H macd went back into sell mode, entered at the open of the next candle at 1.00277. This trade is currently 179 pips in profit.

Ok, that's pretty much the way I trade the 123 pattern. If you have any questions or comments, please feel free to post. I have to go now. God bless you all.

Hi lgtj,

Thanks for sharing this system.

Btw, can you please advise it is the same profitable if I only focus in Daily and 4H chart i/o 3 TF (weekly, daily, H4) like you do ?

Have a nice week end.


Thanks n Regards,

Hello pipfirst and welcome. Yes, it is as profitable if you focus on the 4H and daily time frames only. Just make sure that the weekly macd and price action is in agreement.

Look at these charts of eurusd. First, the monthly chart macd is in sell mode but shows bullish divergence. Second, the weekly chart macd is in buy mode and formed a 123 pattern. Third, price retraced, and the macd went into sell mode on the daily time frame. Fourth, the macd went back into buy mode. I've posted the 5 possible entries on the daily chart. I took entries 4 and 5.

Entries on the daily time frame:
1) early entry
2) second early entry because the macd went into sell mode again and then back into buy mode.
3) add-on entry (inside bar formation)
4) conservative entry (1 pip above the break of point 2)
5) add-on entry

Look at these charts of gbpusd. First, the monthly chart macd is in buy mode. Second, the weekly chart macd is in buy mode and formed a 123 pattern. Third, price retraced, and the macd went into sell mode on the daily chart. Fourth, the macd went back into buy mode. I'm currently in entries 1 and 2, and I'm patiently waiting on entry 3.

Entries on the daily chart:
1) early entry
2) add-on entry




Simple method, but very powerful!!!

Nice thread!!