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How to use the 123 strategy effectively

  • #41
  • Sep 21, 2010 12:41am Sep 21, 2010 12:41am
Quoting Mindsphere
It looks like Paulus must have made a mistake when marking up that trade. He drew the fib from 2 to 1 instead of 1 to 2. The retracement marked there is in fact 38.2 not 61.8.

correct I set it up wrong but hopefully you get the gist
Will answer all others later

thanks for spotting

P
  • #42
  • Sep 21, 2010 11:29am Sep 21, 2010 11:29am
Quoting blueskies
Hi, I couldn't quite follow this trade.

According to the two 5-Min charts you have uploaded, count "1" is around 1.3095, count "2" is around 1.3065 and count "3" is around 1.3077. [Actual prices will vary from broker to broker, but differences should be around 1-2 pips.]

Points 1 to 2 is about 30 pips while points 2 to 3 is about 12 pips, i.e., retracement is only about 40%. Even allowing for differences among brokers' prices, I don't think there was a retracement of 61.8%. So wouldn't it mean that was not a valid 1-2-3 setup according...
the fib level using point 1 and 2 is 1.3077..the high of 3 5 min candles hit 3077 so it qualifies

cheers

P
  • #43
  • Sep 21, 2010 11:33am Sep 21, 2010 11:33am
Quoting blueskies
Hi, just 2 quick questions.

(1) We want to see a minimum retracement of 61.8%. Do you have in mind a "maximum retracement"? For example, if retracement is 85% or even 95% (making the pattern looks like a double top/double bottom [DT/DB]), do you give up on this setup and wait for the next 1-2-3 pattern? Or do you actually trade it as DT/DB setup?



(2) Do we apply this "at least 2 up (or down) candles" rule for all timeframes?

Thanks!
I only use the 61.8 fib retracement to gauge the minimum moves required the actual 123 set up requires that point 3 is higher than 1 for a long and lower than point 1 for a short if its level I ignore above below ignore

Yes and I apply it to 1- 2 and 2-3

cheers

P
  • #44
  • Sep 21, 2010 5:44pm Sep 21, 2010 5:44pm
Hi Paulus - are you still using the keltner 1 minute method? I have found that to be pretty good in the past day or so anyways
  • #45
  • Sep 21, 2010 8:50pm Sep 21, 2010 8:50pm
Hi,

Sorry, but I still don't get it.

To make sure we are discussing the same thing, I have attached your chart again. This time round I have circled points "1", "2" and "3" that I am referring to.

On the chart, apparently point "1" is around 1.3095, not 1.3077. Or are those points "1", "2" and "3" actually old (and hence invalid) counts that have been superseded by new counts not shown on your chart?

Or have I simply misinterpreted the chart / trading rules?

Thanks!


Quoting Paulus
the fib level using point 1 and 2 is 1.3077..the high of 3 5 min candles hit 3077 so it qualifies

cheers

P
Attached Image (click to enlarge)
Click to Enlarge Name: 5min trigger - 1-2-3 Highlighted.gif Size: 22 KB
  • #46
  • Sep 21, 2010 9:06pm Sep 21, 2010 9:06pm
Hi,

Re-reading my own post, I think I have not written my question clearly. Hence, I have decided to re-post my question .

We know:
(1) Point "3" must be higher than point "1" (for Long) and point "3" must be lower than point "1" (for Short)

(2) You require a minimum retracement of 61.8%.

But what happens if the retracement is way above 61.8%?

Let's use an example: Point "1" is 1.3000, point "2" is 1.3025, i.e. a distance of 25 pips between points "1" and "2". Point "3" is 1.3002 (2 pips away from point "1". Therefore, retracement (distance between points "2" and "3") is 23 pips (= 92%).

In this example, will you still trade this 1-2-3 setup as usual? Or is your analysis going to be "The retracement at 92% is too high, and point "3" is so near to point "1" that it almost hits it. Hence, I will pass this setup and wait for the next one."?

Thanks.






Quoting Paulus
I only use the 61.8 fib retracement to gauge the minimum moves required the actual 123 set up requires that point 3 is higher than 1 for a long and lower than point 1 for a short if its level I ignore above below ignore

Yes and I apply it to 1- 2 and 2-3

cheers

P
  • #47
  • Nov 8, 2010 3:27am Nov 8, 2010 3:27am
This has been a very informative thread. Let's keep it alive!
  • #48
  • Nov 9, 2010 12:27pm Nov 9, 2010 12:27pm
having good success with this in fact more so than any other system i have used or created in the past..

Its just price action but you need some rules mine are simple

 

  1. I start looking for 123 at 7am uk time on...not before
  2. if we are going up in the Asian session I look for a short and visa versa
  3. I always take trend reversals not continuation of trends
  4. If I take a short 1st thing then the rest of my trades go long short long short etc
  5. I must have more than 1 candle in between 1 and 2 and 2 and 3
  6. The pull back or rally from 2 to 3 must reach the 61.8% of the 1 to 2 move
  7. My stop loss now goes 1pip below or above 1
  8. My TP is always the distance from 1 to 2

My trades today so far 19+37+57 Im now counting 1 again and looking for longs

Attached Image (click to enlarge)
Click to Enlarge Name: 123 nov.gif Size: 19 KB
  • #49
  • Nov 9, 2010 12:31pm Nov 9, 2010 12:31pm
Monday
Attached Image (click to enlarge)
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  • #50
  • Nov 9, 2010 12:33pm Nov 9, 2010 12:33pm
Daily

1 in place
Attached Image (click to enlarge)
Click to Enlarge Name: 123 daily.gif Size: 23 KB
  • #51
  • Nov 9, 2010 12:40pm Nov 9, 2010 12:40pm
1hour

1 and 2 in place
Attached Image (click to enlarge)
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  • #52
  • Nov 10, 2010 12:20pm Nov 10, 2010 12:20pm
3 signals today

+29-34+37 = +32

currently looking for a short number 1 in place

P
Attached Image (click to enlarge)
Click to Enlarge Name: 123 th.gif Size: 23 KB
  • #53
  • Nov 10, 2010 8:51pm Nov 10, 2010 8:51pm
Hi Paulus, I've been watching your trend magic setup for the past few days and have started to visually put on the 1 2 3's. Have you overlaid both strategies on 5m charts?

Also I traded the "profitable zig zag" method from the March '10 thread but didn't have the win loss statistics to stay with it in the Spring.

Any comments on all three - they all have elements in common. Thanks Lynn
  • #54
  • Nov 12, 2010 11:15am Nov 12, 2010 11:15am
Quoting Paulus
Its just price action but you need some rules mine are simple:

8. My TP is always the distance from 1 to 2
Hi Paulus,

The traditional TP on 123 setups is the distance from 2 to 3. Do you actually use 1 to 2?

Thanks,
BC2
  • #55
  • Nov 12, 2010 2:56pm Nov 12, 2010 2:56pm
Quoting lbhales
Hi Paulus, I've been watching your trend magic setup for the past few days and have started to visually put on the 1 2 3's. Have you overlaid both strategies on 5m charts?

Also I traded the "profitable zig zag" method from the March '10 thread but didn't have the win loss statistics to stay with it in the Spring.

Any comments on all three - they all have elements in common. Thanks Lynn

I will be curious on Paulus's response.
Trend magic is a trend following system, whereas 123 is often (not always) a trend reversal system

You *CAN* take 123 patterns in the direction of the trend, but there are some nice juicy 123 patterns that are trend reversals.

Anyways..this is a question I am currently wrestling with myself so I will be interested to see what Paulus says.

PGPB
  • #56
  • Nov 14, 2010 3:48am Nov 14, 2010 3:48am
Quoting Bobcat2
Hi Paulus,

The traditional TP on 123 setups is the distance from 2 to 3. Do you actually use 1 to 2?

Thanks,
BC2
Yes i do..the more cautious can bring there SL to break even at 2-3 with take profit at 1-3

I only take reversals not trend continuation 123 set ups so Im hoping to cash in on the initial move in a new trend.

Also because I take only reversals my SL at 1 rather than 2 depects the last swing high in the old trend direction so from a technical point of view is very strong

P
  • #57
  • Nov 14, 2010 3:51am Nov 14, 2010 3:51am
Quoting pgpb
I will be curious on Paulus's response.
Trend magic is a trend following system, whereas 123 is often (not always) a trend reversal system

You *CAN* take 123 patterns in the direction of the trend, but there are some nice juicy 123 patterns that are trend reversals.

Anyways..this is a question I am currently wrestling with myself so I will be interested to see what Paulus says.

PGPB
Hi Ib

Makes good sense but I'm persevering with keeping this indicator free..Im only using fib to judge the rally or pull back to 3.

Also I do think 123 reversals are the safer stronger pattern..agreed if a currency moves up all day you can see loads of 123's in the direction of the trend..but I do prefer the reversals as it gives 2-3 good signals each day.

Cheers

P
  • #58
  • Nov 15, 2010 4:20am Nov 15, 2010 4:20am
Anyone trading this morning?
  • #59
  • Nov 15, 2010 12:13pm Nov 15, 2010 12:13pm
I've attached a chart of a setup and my pending orders. I'm interested in others opinion on the validity of the set up. I'm not sure how to use fibs to ascertain whether or not it was valid. Lynn
Attached Image (click to enlarge)
Click to Enlarge Name: Screen shot 2010-11-15 at 11.08.16 AM.png Size: 20 KB
  • #60
  • Nov 15, 2010 3:35pm Nov 15, 2010 3:35pm
Well it never developed so I've cancelled my buy stop and will move the numbers as the chart plays out.
Attached Image(s) (click to enlarge)
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