The purpose of this thread is to continue to develop trading rules based on 123 patterns.
In November 2010 I published an indicator called 123PatternsV6. That indicator was the result of much discussion and development work in a thread called [Multiple Trading systems gbpusd only]. Zamanib started that thread and I recognise his valuable work on that project.
The version of 123PatternsV6 that I use is unchanged for more than a year now and can be downloaded from that previous thread.
123Alarms addon see post #27
123Alarms update with email alerts post #1286 (7 Dec 2011)
Why a new thread ?
I am starting this new thread to start with a new focus and avoid confusion with that previous multiple systems thread.
Guidelines to keep this thread on-track
This thread's focus is using 123PatternsV6 for trading decisions.
Thank you for the indicator.
I wish you success & happiness!
Best regards from Switzerland!
Welcome back -- long time - OK let give it a try on normal candle this time range bars was not that great trading this system.
Hi rob, I havent seen you around for a while where have you been.
Using ZigZag only
123PatternsV6 uses ZigZag which comes with MT4.
To understand this use a plain chart, add ZigZag only, then go to any candle and look back in time. What are the last three points made by ZigZag? Label those points 1 2 3. When price continues from point 3 to go past point 2 then we have a break. Some people call this 1-2-3-break.
Ideally the move from point 1 to point 2 should be more pips than the move from point 2 back to point 3. In other words point 3 is somewhere in the middle between point 1 and 2. I say 'ideal' because that alignment strongly suggests that 1 to 2 is an impulse move (with the trend) and 2 to 3 is a retrace move (against the trend). This provides evidence of trend direction.
In summary ZigZag filters the noise and allows us to focus consistently on just the most important high/low points. With ZigZag only we can easily observe:
We also have two categories of 123 patterns. First, those patterns where 3 is ideally located in between 1 and 2. Second, those patterns where 3 is located beyond 1. Some would say this second category breaks the pattern and is therefore not a valid 123 anymore.
Robdee You are the man,thanks for the GREAT 123 indicator best i,ve come accross fit very well into my simple trading system.
KISS keep up the thread i will follow with intrest.
First I want to welcome and thank Forexcube zamanib ukcool HankT and gprfc. Your interest and support is appreciated. I like to look at FF user profiles and try to imagine what it is like to be living (and trading) in those places all over the world where you are living now.
Here in New Zealand it is spring. Gardens, lambs and calves are all growing fast right now. Gusty winds cover the country as we change seasons. I went for my 'first swim of the season' in the harbour recently. It was still pretty cold but refreshing and I am looking foward to long summer days.
It would be nice to read descriptions of other places where traders live.
Now about this indicator...
In my first few posts to this thread I am going to start simple and build up layer by layer. This will allow readers to see the foundation ideas that went into this indicator. In the last post I showed that something as simple as just dropping ZigZag on the chart will give you a lot of information.
I think it is important to actually do that. Manually insert text labels 1 2 3 break on to a chart that has ZigZag only. You will get a better feel for what the indi is trying to do. Notice those places where patterns overlap or it is hard to tell the difference between bullish and bearish patterns.
For a basic setup we keep ZigZag on the chart and overlay 123PatternsV6 on top. We change the indicator settings turning off ShowAllLines ShowAllBreaks and ShowTargets. ZigZag had a default depth of 12 so we set our indicator to the same ZigZagDepth=12.
Now we can see (on top of ZigZag) the blue dots, red dots, and break arrows as below.
i can not wait to read more from you...
Good moring (at least for me it is
I see greatpotential in your indicator. Have you ever thought of giving it a sound alert when it draws an arrow ??
I will be following, very interesting
Edit: found the 123alarm
Great indicator I'm looking forward to the thread !!
I like 123 patterns, looking forward to your continued insights with this cool indi.
I demo'd the 1 2 3 a year or so ago and had so-so results, not enough for me to continue. The problem I found was that #3 often didn't break the #2 position or broke it just a little so that i got into a trade but then reversed. I will watch your alls progress with the indicators listed to see how this "New and Improved" version goes. Thanks for posting, p.
When are 123 patterns useful?
That is the goal of this thread as in post #1
"My goal for this thread is to work together on understanding 123 patterns, when are they useful, and when they are not."
In other words
What can become new and improved is our understanding and trading practice. To do that requires the efforts of trial, error, and tracking our progress.
The MTF zigzag indicator looks good,where can i find this,i would like to use this along with the 123 indicator.
Robdee made my first pips using the 123 setup taking it slowly as this is the first time i have used this strategy.
Basic Setup Sell Zones
Welcome AlexM80 Udine Eamonn simmo24 and porfiro, good to have your feedback. Looks like I better carry on with more posts
In the last post I described the basic setup using ZigZag and my indicator. With the basic setup only ideal 123 patterns are shown with red dots for bearish and blue dots for bullish. Distorted patterns are ignored and not highlighted at all with a basic setup.
Now on to the next layer...
To the basic setup I now add sell zones. A red arrow points to the first candle to close below (2). This shows that the bears are strong enough to push the price down and close below that previous price level (2) where the bulls last showed their strength. At this point who is winning, the bulls or the bears ?
The price level where that red arrow is printed now becomes a guide for future selling interest. A sell zone then is an area of future selling interest.
I draw this with a pale green rectangle that covers the red arrow and stretches out into the future. The bears were winning at that price once before so they will remember that price. The bears will be interested in being strong at that price again to sell more lots or to defend their short positions.
The bulls will also remember that they were beaten at that level and will push up to retest the strength of the bears. If the bulls give up that fight too easily then price will drop away too fast and will not come back into that interesting sell zone. In that case I will not have a trade entry which is OK with me.
For my trades I am only interested in selling when price comes into the sell zone. If I liked I could enter immediately after the break. I could grab some pips that way. However the reason I do not do this is I am usually not watching the chart when that happens (so I miss my chance) and I also like to see some bullish strength (pushing price back up into the sell zone) so I have the bulls enthusiastically filling my sell limit orders (as a result of their buying activity).
Does that make sense ?
Great to see you around again.
I will be following your thread with interest, hoping to learn and share where I can.
sorry for the delay in my reply ... I was sleeping.
here you have it ...
Subscribed and downloaded the indy to get familiar with it.
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