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How to use the 123 strategy effectively

  • #361
  • Dec 17, 2010 4:18pm Dec 17, 2010 4:18pm
Quoting Paulus
Im tempted to close as both are in profit but I will set an alarm and if no tp or sl hit i will close around an hour from now


stats for my week

EU

+30
+15+30+22
+22-59+41
+33+28

GU

+14
+48+29
-45+25
+26+25
+28

and 2 open trades 1 each on the above

P
Ok just closed both

GU for +21
EU for +15

so figures for the week now read

EU

+30
+15+30+22
+22-59+41
+33+28 +21

GU

+14
+48+29
-45+25
+26+25
+28+15

P
  • #362
  • Dec 17, 2010 4:20pm Dec 17, 2010 4:20pm
Quoting ariku
Nice week Paulus! Congrats and thank you for all your posts and ideas! Are you still gonna trade this year? Or how do you see the coming weeks? Isn't volume going down drastically?
I will trade every day unless markets closed..low vol is not good for any type of trading smaller TP but also smaller loss.

P
  • #363
  • Dec 17, 2010 7:27pm Dec 17, 2010 7:27pm
Is that right Paulus? 100% winning trades this week? That is awesome. Nice work!
Lord, Liar, Lunatic. Those are only 3 options to Christ's diety claim.
  • #364
  • Dec 17, 2010 8:30pm Dec 17, 2010 8:30pm
Quoting Paulus
I have 1 trade only today so far GU for +28 which was a short

Im now looking at 123 long counts

have 123 in place on GU and EU atm...orders set for the break of the 2 level but no where near yet...and it could change

In fact as i type this the GU just made lower low so I start my 1 count agin

P
Hi Paulus....it's not a big deal to me, however, I notice that your MT4 clock is one hour ahead of my MT4 clock....my MT4 demo is with AlpariUK, which (I think) is +1 UTC....is your MT4 +2 UTC?

Thanks in advance,

Jeff
  • #365
  • Edited 9:25pm Dec 17, 2010 9:19pm | Edited 9:25pm
Hello everyone....me again!

So, I did a very cursory look at June 2010, looking for trades ONLY after 11am UK time....the results were not so good, with only a 43% hit rate...especially in the middle of the month, things were brutal as the markets were rather aimless...I will give a full analysis including all UK and US market times....perhaps things will be better....I was considering a max-out money management plan, trading the full (well 99%) margin at 50:1 (stoopid CFTC, lol), but a losing month could really derail that kind of MM....it seems Paulus' MM plan of 5% per trade makes a lot of sense to weather the times when things aren't as rosy...

With that said....when the discussion turned to trading G/U and others, I figured "self, this is just a mimic of the other pairs; if there is a pattern on E/U, it will likely also be on G/U"....well, today's action proved me wrong!

Although there tends to be a fair bit of correlation (check out www.mataf.net for good correlation data) between G/U and E/U, there seems to be enough at times to allow a 1-2-3 on one pair where the other just moves in the same general direction....interesting!

So, next question, thought...how many pairs are trade-able? E/U and G/U of course...how about the U/J during Asian hours? E/J (which used to be the darling of scalpers because when it moved, it moved, but lately has lost some of its fizzle so it seems)? Gold? http://i13.photobucket.com/albums/a2...old-bricks.gif Silver? http://i13.photobucket.com/albums/a2...silverware.gif Exotics?

..I suppose if a currency has volatility and directional movement at times, it is a candidate! If this works "70% of the time", then do we keep 20 windows open, cast the net at 5% each (or perhaps less if trading a bunch), and reap what is sown? I would like to hear from others what they trade besides E/U and G/U which are already excellent candidates....

One last bit of thought....I've noticed nearly every single 1-2-3 pattern, when implemented, goes at least 2 to 3 pips at least initially....it might be an interesting semi-scalping strategy to catch just the first few pips, especially if the hit rate is very high...I mention it because I wonder if the 1 minute (or some other bastardization like 2 or 3 minute charts on packages that allow it) charts, even though they give false signals for longer TPs, might provide enough momentum to catch a pip or two....

Have a good weekend everyone,

Jeff
  • #366
  • Dec 17, 2010 11:15pm Dec 17, 2010 11:15pm
Now there you go trying to make a very simple system into something complicated and harder than it has to be..........
  • #367
  • Dec 18, 2010 3:15am Dec 18, 2010 3:15am
Quoting capstone
Is that right Paulus? 100% winning trades this week? That is awesome. Nice work!

I had a loser on each -59-45

But its a good result

cheers

P
  • #368
  • Dec 18, 2010 3:20am Dec 18, 2010 3:20am
Quoting stljeffbb
Hi Paulus....it's not a big deal to me, however, I notice that your MT4 clock is one hour ahead of my MT4 clock....my MT4 demo is with AlpariUK, which (I think) is +1 UTC....is your MT4 +2 UTC?

Thanks in advance,

Jeff
Hi I use FXDD for the charts but a spread betting for my actual trading you can trade £10 a pip and scale out £1 a time its flexible

My charts are 2 hours ahead of my local time which is GMT

cheers

P
  • #369
  • Dec 18, 2010 3:43am Dec 18, 2010 3:43am
Thank you to saidar,poulos,simpleguy to share this strategies with me and the otherfx traders.....i hope,it will success in forex industries
i will do this strategies in coming week in my REAL ACCOUNT
and i will post here went i enter a market for Saidar or Poulous or Simpleguy to look my trade it's a good or bad trade,OK


BTW=what are BEST Time Frame we must use to understand 123 wave??
i look at 15m,its good....maybe you all have another options


OK......see you guys next week and MERRY CHRISTMAS for you all celebrate
  • #370
  • Dec 18, 2010 7:14am Dec 18, 2010 7:14am
Quoting stljeffbb
Hello everyone....me again!

So, I did a very cursory look at June 2010, looking for trades ONLY after 11am UK time....the results were not so good, with only a 43% hit rate...especially in the middle of the month, things were brutal as the markets were rather aimless...I will give a full analysis including all UK and US market times....perhaps things will be better....I was considering a max-out money management plan, trading the full (well 99%) margin at 50:1 (stoopid CFTC, lol), but a losing month could really derail that kind of MM....it seems...
Jeff

It would be great if you could post your analysis of June with only trading from 11am UK time...many of us live in North America and can not trade the London open.

I am not going to comment on your MM ideas, ...certainly MM is a personal choice, but I would really caution you to go over 5%......lots of people recommend 2%

You have also brought up a point that I also wrestle with.....being short (or long) both EU and GU is (in my opinion) just doubling your lot size since they tend to move the same way

Your other point of scanning multiple currency pairs is an interesting one to me....the idea of just scanning for an ideal set up.....I guess the question is.....do some 123 set ups look better than others?
Of course the other side of the coin is that it becomes very difficult to back test this.....and also we may be spreading our attention to thin.

Your comment about noticing how most 123 patterns go at least a few pips into profit, and maybe we could consider a scalping stratagy.......I would vote thumbs down to that.....in that you would be risking a larger amount of pips for a very small amount of pips and I am certain that would never work over the long term........."but".......I did notice on one of months of backtesting that you posted......that often a trade will go into profit by maybe 20 pips.....but then it will fall back and turn into a loss......I think in those situations moving the stop to break even or even protecting a small number of pips would be a good stratagy.

I really hope you continue posting your research and thoughts....it is very much appreciated (even the crackpot ideas LOL)

PGPB
  • #371
  • Edited 8:24am Dec 18, 2010 8:23am | Edited 8:24am
Quote
tradestar1 said: "Now there you go trying to make a very simple system into something complicated and harder than it has to be.........."
Hello tradestar1....yes, you might be right on this one! However, since I live in the USA, I likely can't catch all of the times this triggers, and as I mentioned in a previous post, this method **MIGHT** work better at different times of the market day, just as the markets change throughout the trading day (hence the reason Paulus does not trade Asia)...so, I'm just trying to think of a way to capitalize on the possibilities...

@ Paulus...thanks for your info...whew, I'm glad your charts are +2 UTC...that would have been a problem for my previous backtesting results!

OK, the next quotes are from pgpb:

Quote
Jeff

It would be great if you could post your analysis of June with only trading from 11am UK time...many of us live in North America and can not trade the London open.
Sure no problem...these (at the moment) have no chart pictures, and they are preliminary:

June 2010, following Paulus' rules (to the best of my knowledge), EXCEPT, no trade will be made before 11am UK time, however, if there is a pattern that forms BEFORE 11am, it is valid:

Total trade performance: 11/26 for 42.3%
Total pips: -148.2

As I said before, the middle of the month was brutal...there was a run of 1/11 (yes, one winner out of eleven trades)

Quote
I am not going to comment on your MM ideas, ...certainly MM is a personal choice, but I would really caution you to go over 5%......lots of people recommend 2%
Fair enough....I mention the possibility of using less if I start hunting on multiple pairs...what I want to do is get a good 11 months of data in, see where the numbers fall on E/U, and decide from there...

Quote
You have also brought up a point that I also wrestle with.....being short (or long) both EU and GU is (in my opinion) just doubling your lot size since they tend to move the same way
Yes, however, what happened yesterday, even though it was only one trade, shows that the pattern can happen on one pair and not on the other....I think this opens up a lot of possibilities to capture the trend that is occurring in the overall markets...sure, we see direction (big moves), but not always a 1-2-3 before said move...as what happened yesterday, a 1-2-3 appeared on G/U but not E/U, so Paulus captured the move without being married to just one pair!

Quote
Your other point of scanning multiple currency pairs is an interesting one to me....the idea of just scanning for an ideal set up.....I guess the question is.....do some 123 set ups look better than others?
Of course the other side of the coin is that it becomes very difficult to back test this.....and also we may be spreading our attention to thin.
True enough....concerning the 1-2-3 setup looking better, my hunch (just a hunch) is that if the rules are followed, the results will be similar in volatile and directional pairs....the one thing that could be a problem...E/J has had more exaggerated moves compared to E/U...a retrace to the proper fibo level MIGHT give a false signal in E/J if it's moves are amplified compared to E/U...quick backtest scans can be done in about 25 minutes per month backtested...so, spend about 5 hours to do a year and you have a partial answer!

Still, I must mention that past performance does not indicate future results! The markets are ever changing, just like when sailing, you sail where the wind is...when the wind goes away, you think of something else (like rowing, outboard motor, personal nuclear reactor, etc.)

Quote
Your comment about noticing how most 123 patterns go at least a few pips...
Fair enough...we all have different methodologies and come from different backgrounds...I'll just say you would be amazed with some of the things I have seen that are possible! Nonetheless, I personally feel that your idea of grabbing "20 pips" has certain value...the idea of risking more pips for a small gain as you mention...not necessarily from my perspective....one idea is to grab the very first pulse, no matter what it is, with a very tight SL...there are VERY few trades that do not go at least 2 pips in the direction of the perceived trend....if a strategy nets one pip 90% of the time and gets minus three 10% of the time, trading at max leverage nets 12% profit over 50 trades...chances are, more pips than one could be garnered, but this is just a "crackpot" idea...1-2-3 is one part of my overall strategy, and "scalping" (not necessarily what I propose, but other scalping methodologies) is another.

Quote
I really hope you continue posting your research and thoughts....it is very much appreciated (even the crackpot ideas LOL)
Will do!

Regards,

Jeff
  • #372
  • Edited 7:55pm Dec 18, 2010 6:27pm | Edited 7:55pm
OK, the results are in from June 2010....well, at first, I was thinking the results were poor, however, after some thinking and using Paulus' MM as a guide, this month actually would have turned out quite good! Using Paulus' 5% per trade as a guide, the result for June 2010 would have been approximately +30%! Interesting that October at 51% would have been worse, even though the pip count was much better...

Total trade performance: 25/45
Total pips: -97.8

Well, I think I identified all of the 1-2-3s properly...I do have a hypothesis. This was the month when the E/U dropped to 1.19...I noticed trades that formed to the downside were often fighting against a larger trend (so it seemed) to go up...

In the (2) .zip file, I included some pics for reflection, including some very near misses that look very much like "proper" 1-2-3s, but do not quite fit the bill...

Interesting to have a strategy that is negative pips, but positive expectation!

As mostly a scalper, I have never thought of it in this way....opens up some possibilities in my mind...to find a method that is greater than 50% irregardless of the pip count (within reason of course...certain outlying conditions would not allow a 5% per trade risk)....

Regards,

Jeff

EDIT: I'm realizing that, if we use Paulus' MM method, it is better to look for a pair that is more accurate in the 1-2-3 strategy as opposed to pips gained...
Attached File(s)
File Type: zip 123 MT June 2010 Study.zip   4.0 MB | 356 downloads
File Type: zip 123 MT June 2010 Study (2).zip   308 KB | 289 downloads
  • #373
  • Dec 18, 2010 8:53pm Dec 18, 2010 8:53pm
After looking through some of your screen shots I saw several missed trades in each...... I am not sure what your testing criteria was but I think the results are bit inaccurate.

Are you only taking 1 trade a day? On a 5 minute chart there are more than that available during the session, which for best results would be London and New York.

What is the time of day of your trades? I see the TF, and the time stamps at the bottom of the chart but that doesn't tell me what time zone your in.

There are a lot of unanswered questions here regarding your testing.
  • #374
  • Edited 9:29pm Dec 18, 2010 9:22pm | Edited 9:29pm
Quoting tradestar1
After looking through some of your screen shots I saw several missed trades in each...... I am not sure what your testing criteria was but I think the results are bit inaccurate.

Are you only taking 1 trade a day? On a 5 minute chart there are more than that available during the session, which for best results would be London and New York.

What is the time of day of your trades? I see the TF, and the time stamps at the bottom of the chart but that doesn't tell me what time zone your in.

There are a lot of unanswered questions here regarding your...
Hello tradestar1....here are my testing criteria:

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

I added a ninth rule:  Enter one pip above/below the trend on an entry,  exit one pip above below exit on a stop loss.  Paulus has mentioned this  in some other posts.  Also, I did not count ANY Asia action...the start  times listed in the spreadsheet are the point 1 start times...
Quote
After looking through some of your screen shots I saw several missed trades in each...... I am not sure what your testing criteria was but I think the results are bit inaccurate.
I would appreciate any missed trades....I would like to add them to the results so they are as correct as possible! If someone finds a missed trade, let me know, I will amend the results and post them to the original post. Some situations look very much like trades, but ultimately are not quite there....

Let it be known that I'm not an expert here, but I am doing this research for my own purposes and sharing the results here...I really want to get this right, so any help is gladly accepted...

To repeat (as I have mentioned in previous posts), this is the Alpari UK demo on MT4...Alpari is +1 UTC, so 7am UK time is 0800 on Alpari time.

Quote
Are you only taking 1 trade a day? On a 5 minute chart there are more than that available during the session, which for best results would be London and New York.
Quote
What is the time of day of your trades? I see the TF, and the time stamps at the bottom of the chart but that doesn't tell me what time zone your in.
I'm taking any trades when they come, except if they are in the Asian session...and yes, I'm looking at London and New York sessions (as per Paulus' instructions)...this is backtesting...I'm actually in UTC -6 (Chicago, USA)...

Quote
There are a lot of unanswered questions here regarding your testing.
Very well, I will do my best to answer them!

Regards,

Jeff
  • #375
  • Dec 19, 2010 6:35am Dec 19, 2010 6:35am
Hi Jeff

We appreciate the hard work you have done.

I do think that some 123's "look" better than others....and I am trying to figure out why.

For example in your October study, trade number 3

your number 2 point is a lower high than the high at 1.3745

See image

There are others where I don't like the look of them..

If I have time I will post a few more

PGPB
Attached Image
  • #376
  • Dec 19, 2010 6:49am Dec 19, 2010 6:49am
Jeff

Again....I don't mean to criticize you have provided wonderful data

In trade number 5 it does not look like a reversal

See image

I do actually think we can take 123s going in the direction of the trend
This is what is taught in this thread
http://www.forexfactory.com/showthread.php?t=80290

Paulus is looking for reversals only

It would be great if others commented on your data

...again...thanks for creating the data

PGPB
Attached Image (click to enlarge)
Click to Enlarge Name: trade5.png Size: 187 KB
  • #377
  • Dec 19, 2010 7:24am Dec 19, 2010 7:24am
Quoting stljeffbb
OK, the results are in from June 2010....well, at first, I was thinking the results were poor, however, after some thinking and using Paulus' MM as a guide, this month actually would have turned out quite good! Using Paulus' 5% per trade as a guide, the result for June 2010 would have been approximately +30%! Interesting that October at 51% would have been worse, even though the pip count was much better...

Total trade performance: 25/45
Total pips: -97.8

Well, I think I identified all of the 1-2-3s properly...I do have a hypothesis. This...
Jeff,
Nice work. I looked at the files in the first zip file and thought I'd offer my thoughts. I enter/exit on a 10M chart rather than a 5M chart, which takes some of the noise out of the 5M entries. Once a trade is up 20 pips I move my stop to the entry price and let it ride or fail. If it takes me out, I start looking for another 123 set up or a different trade set up. I would not suffer some of the losses that you noted.

Also try to stay away from trading late NY, although your analysis shows that there are some nice but slow trade opportunities there. Finally, I also see opportunities for entries on the pullbacks as they develop, after the first 123 is moving, but that is for another thread.
  • #378
  • Edited 8:37am Dec 19, 2010 7:25am | Edited 8:37am
Quoting pgpb
Jeff

Again....I don't mean to criticize you have provided wonderful data

In trade number 5 it does not look like a reversal

See image

I do actually think we can take 123s going in the direction of the trend
This is what is taught in this thread
http://www.forexfactory.com/showthread.php?t=80290

Paulus is looking for reversals only

It would be great if others commented on your data

...again...thanks for creating the data

PGPB
Hello pgpb....thanks for pointing out the previous two trades....criticism is welcomed and encouraged! Of course, I hope any criticism is of the constructive nature. Even though Paulus has a great set of rules, because I (we) do not see exactly how he sees, I try my best to assume....my wife and I sit there sometimes and think, "OK, would he have taken this one?" ...even with the rules, there are times that are a bit iffy! Add on to that the idea this is backtesting, so we've resorted to scrolling to avoid knowing what the results will be...

OK, a reply to post #375....yes, in retrospect, this might very well be a continuation. I'm not 100% certain what constitutes a "trend" (in the eyes of Paulus)...we do have thirty-five minutes of almost all down candles, and internally speaking we do have some "extreme" points...however, upon looking at the larger trend, it does appear to be going generally up...

To reply to post #376....again, the larger overall trend does appear to be up, however, we have a sideways to down move where the small red circles are...this was the basis for this 1-2-3 here...to my eyes, the 5 minute trend had moved down for nearly two hours, although I am curious about the fact there is that one candle at about 1100 Alpari time that appears to dip slightly lower than the point 1 we soon see:

http://i13.photobucket.com/albums/a2...t20100005a.jpg

THis is partly why I'm doing this research...to stimulate discussion and help us all to determine when it is best to take these patterns...the higher the hit rate, the better!

Regards,

Jeff

EDIT: After further review, I have found that point 1 on this chart IS actually the lowest point in that two hour move between the red circles....by 0.2 pips!
  • #379
  • Edited 7:29am Dec 19, 2010 7:28am | Edited 7:29am
Quoting GEfx
Jeff,
Nice work. I looked at the files in the first zip file and thought I'd offer my thoughts. I enter/exit on a 10M chart rather than a 5M chart, which takes some of the noise out of the 5M entries. Once a trade is up 20 pips I move my stop to the entry price and let it ride or fail. If it takes me out, I start looking for another 123 set up or a different trade set up. I would not suffer some of the losses that you noted.

Also try to stay away from trading late NY, although your analysis shows that there are some nice but slow trade opportunities...
Hello GEfx....thanks very much for the advice! Do you have a stop loss for "epic fails"....that is, situations where the price barely crosses the point 2 trade trigger line only to come back and never again go beyond that trigger point? And, yes, I know what you mean by staying away from late NY...I've scalped there a fair amount, and the movement is slow indeed at many times!

I will seriously consider your idea of a 10 minute TF....

Regards,

Jeff
  • #380
  • Dec 19, 2010 8:18am Dec 19, 2010 8:18am
Hi Jeff, this is probably not what others here do, but this is where I see stops in the 123 set up, so just think of this as an alternative to be consider among many. Sorry about the messy chart and I hope it is clear what I am doing:
Attached Image (click to enlarge)
Click to Enlarge Name: 123.gif Size: 23 KB


Edit: Although you can't see it on the chart, the market eventually got to the limit target.
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