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How to use the 123 strategy effectively

  • #621
  • Dec 30, 2010 6:30am Dec 30, 2010 6:30am
Now watching for another short entry on the small 38.2 retrace. Will set target at -38.2 with 5% risk. Not looking for long yet as I see no upside interest in the charts ATM.
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Today's zone = Tomorrow's opportunity!
  • #622
  • Dec 30, 2010 6:37am Dec 30, 2010 6:37am
Quoting pres78
Got into this trade with a pending buy order while I was out shovelling all the snow we have gotten... I have my SL at 0.0 and my TP at 200.0
This trade hit my SL... I tried my luck by letting it run past end of day. Couple of times I could have gotten out at BE or + a few pips. It was range bound for some time and eventually broke to the downside. Oh well you win some and you lose some.
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Today's zone = Tomorrow's opportunity!
  • #623
  • Dec 30, 2010 7:21am Dec 30, 2010 7:21am
Quoting ChinaWombat
be careful it repaints...i think its easier to do manually but if you need it
That is one darn confusing indicator (3 Level ZZ semaphor)......I do sometimes use zigzag or this fractal indicator, but I try to live as indicator free as possible.

PGPB
Attached File(s)
File Type: mq4 _fractal.mq4   4 KB | 389 downloads
  • #624
  • Dec 30, 2010 9:27pm Dec 30, 2010 9:27pm
I was wondering how long it would take before someone would kill this system with automation and indicators..........Seems 42 pages is the magic number.

Lets do this..... the auto traders and indicator maniacs can start their own thread and not clutter up a simple pure system.

How about it guys, lets keep this thread clean and simple.
  • #625
  • Dec 31, 2010 5:52am Dec 31, 2010 5:52am
Quoting tradestar1
I was wondering how long it would take before someone would kill this system with automation and indicators..........Seems 42 pages is the magic number.

Lets do this..... the auto traders and indicator maniacs can start their own thread and not clutter up a simple pure system.

How about it guys, lets keep this thread clean and simple.
tradestar1.....umm....I think it is a bit early for you to sound the indicator alarm.

One person posted 3levelzzsemaphor......which is obviously of no use.

I mentioned zigzag (which if you check Paulus's post history you will see he used in the past).....I also mentioned a fractal indicator, which I think if you install it, you will discover it will win the most innocuous indicator award.

Zigzag is like training wheels it helps you see the HH, HL

So I hardly think the thread is deteriorating into an indicator frenzy


PGPB
  • #626
  • Dec 31, 2010 8:26am Dec 31, 2010 8:26am
Quoting Paulus
I bit im sorry

seems along day today ..but I have deja vu ..the trouble with putting yourself on offer your some times shot at.lols sorry tdeu

Im not the leader here many many good traders here far better than me..far more disciplined I know that for a fact I see evidence of it all over this forum

the market will go where it will driven by supply and demand

123 shows that supply and demand to be right 55% of the time means you make money thats good

To double your account every 20 trading days is great .. can it be done yes of course

But

[b]we...
Hello everyone......back from a bit of vacation....55% is certainly workable with a "flat x%" style MM, but I hope the accuracy is at least 60%, and was really hoping Mark Crisp's number of 70% from 2002 (dealing with many different markets and longer time frames I might add) was the ticket (then again, I want 100%, lol).....

Regards,

Jeff
  • #627
  • Dec 31, 2010 8:41am Dec 31, 2010 8:41am
Quoting tradestar1
..........Seems 42 pages is the magic number.


or when someone introduces the very colourful LSMA to work out the trend and then the arguments begin about whether 14 or 21 is the best setting....


clean charts, no indi's, no divergance, no stochs.... just a fib tool
Catching a falling knife, no, I'm just trading the Gartley!
  • #628
  • Dec 31, 2010 8:54am Dec 31, 2010 8:54am
Quoting stljeffbb
Hello everyone......back from a bit of vacation....55% is certainly workable with a "flat x%" style MM, but I hope the accuracy is at least 60%, and was really hoping Mark Crisp's number of 70% from 2002 (dealing with many different markets and longer time frames I might add) was the ticket (then again, I want 100%, lol).....

Regards,

Jeff

Jeff,

you better use this link to quantify & qualify your trading risk...

http://www.hquotes.com/tradehard/simulator.html

a win prob with just .55% and R:R of .95 is not going to give you very much joy....but at .65 or R:R of 1.2 & .55% then things look better
enter 100 in the lines qty to give a simulation of 100 traders
Catching a falling knife, no, I'm just trading the Gartley!
  • #629
  • Edited 10:54am Dec 31, 2010 10:18am | Edited 10:54am
Quoting ChinaWombat
Jeff,

you better use this link to quantify & qualify your trading risk...

http://www.hquotes.com/tradehard/simulator.html

a win prob with just .55% and R:R of .95 is not going to give you very much joy....but at .65 or R:R of 1.2 & .55% then things look better
enter 100 in the lines qty to give a simulation of 100 traders
Hello ChinaWombat....yeah, I like that simulator very much! LOL, I even posted it in this thread to show Paulus (post #139). Yes, if we trust the generator I totally agree with your assertion...however, if I'm correct here, based on Paulus' "flat x%" MM (and many others of course use this for MM), the R:R is irrelevant because we adjust our lot size to give us either a plus x% or negative x% (not including the few times we end at US close, which is a factor in backtesting IMHO)...I did a very quick looksee on my excel this morning of 500 trades (roughly one year of trading), 55% hitrate, and a 5% flat positive or negative....the result was a gain of 552%...of course, this is very vanilla and does not count for things like US close, spread, inaccuracies based on small pip trade size (ex... a 1-2-3 of 15 pips versus a 1-2-3 of 100 pips....the 100 pips will give a closer R:R of 1...hey wait, now I might understand where you got your .95 R:R!). The key to the high return is compounding! I have not factored in any catastrophic streaks like 20 losses in a row, however, I do believe that if a system has a true hitrate of 55% over a timeframe (like one year), it is not going to matter...

Sorry, this became a rambler....simple 5%/-5% vanilla excel chart attached...

Regards,

Jeff
Attached File(s)
File Type: xls 5 pct per trade 55 pct hitrate.xls   61 KB | 333 downloads
  • #630
  • Dec 31, 2010 10:23am Dec 31, 2010 10:23am
Quoting ChinaWombat
or when someone introduces the very colourful LSMA to work out the trend and then the arguments begin about whether 14 or 21 is the best setting....


clean charts, no indi's, no divergance, no stochs.... just a fib tool
And who introduced the LSMA?
Today's zone = Tomorrow's opportunity!
  • #631
  • Dec 31, 2010 6:28pm Dec 31, 2010 6:28pm
Guys, I have a question. Fibo 61.8% is better than 50% in results? Or it does not matter?
A successful trading depends on knowing what to analyze.
  • #632
  • Dec 31, 2010 10:31pm Dec 31, 2010 10:31pm
Quoting Pipdealer
Guys, I have a question. Fibo 61.8% is better than 50% in results? Or it does not matter?
Not really an issue. these are mearly visuales to help, not hard fast rules.
  • #633
  • Edited Jun 12, 2014 2:53am Dec 31, 2010 10:34pm | Edited Jun 12, 2014 2:53am
Here is a little calculator to help with your position sizing.
  • #634
  • Jan 1, 2011 6:07am Jan 1, 2011 6:07am
OK. The same question again, how about 38.2％? I just want to know what levels are better...

According to the rules, the position of point 3 has to be higher than point 1 in an uptrend (lower than point 1 in a downtrend) right? Meaning point 3 must be a retracement of point 1 and 2, and if it goes lower than point 1, it will NOT be a retracement any more. That's how I understand the logic. Correct me if I am wrong.

Also, the way I understand the levels of retracements is that if a trend is pushed back at more than its 50% level, it is usually a weak one. If it only gets pushed back to 38.2％, then the trend is rather strong.

So, in this system, we first find a trend, which is point 1 to point 2. And wait for a retracement, point 3.

If point 3 retracement (a retracement of 1 and 2) is at 38.2％, can we expect this PA will more likely go beyond point 2 compared to the 50% or 61.8% level?
A successful trading depends on knowing what to analyze.
  • #635
  • Edited 11:19am Jan 1, 2011 11:08am | Edited 11:19am
OK. The same question again, how about 38.2％? I just want to know what levels are better...

According to the rules, the position of point 3 has to be higher than point 1 in an uptrend (lower than point 1 in a downtrend) right? Correct Meaning point 3 must be a retracement of point 1 and 2, Point 2 is the retracement, Point 3 is the continuation and if it goes lower than point 1, it will NOT be a retracement any more. That's how I understand the logic. Correct me if I am wrong.

Also, the way I understand the levels of retracements is that if a trend is pushed back at more than its 50% level, it is usually a weak one. If it only gets pushed back to 38.2％, then the trend is rather strong.While it is true some retracements are better than others, don't get to hung up on the fib levels, your job is to take a high probability trade and trade it with reduced risk

This is a very simple high probability method. All you are doing is betting on the continuation of a trend after a pullback. Don't make it any harder than that.
Here is something for you to think about The exit is more important than the entry.

For some additional very good reading regarding the 123 system take a look at The System II (Yes with irony)
  • #636
  • Jan 1, 2011 11:08am Jan 1, 2011 11:08am
Two nice trades from yesterday:
GPB/USD + 77 pips
EUR/USD + 44 pips

I broke the rules a little bit and enter earlier - just when the price hit 61.8 fibo having confirmation from stochastic-it worked out.

Both trades are turning into potentially shorts-we will see.

thanks for the system Paulus
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“The harder you work, the harder it is to surrender.” - Vincent Lombardi
  • #637
  • Jan 1, 2011 11:21am Jan 1, 2011 11:21am
Nice trades Jacob.
  • #638
  • Jan 1, 2011 2:19pm Jan 1, 2011 2:19pm
I understand that 123 pattern appears during a trend. This one is actually one of Granville Rules. You take a position at a retracement of a trend.

They are also M-top or W-bottom when they appear at the top or bottom of a trend.

But it seems 123 patterns can appear where no clear trend exists. And those are I am interested in.

So, if all 123 patters move the same, once we see PA move towards point 2 from point 3, we just follow the direction? By the way, I guess I do not need to consider Fib levels except for the purpose of TL?
A successful trading depends on knowing what to analyze.
  • #639
  • Jan 1, 2011 3:35pm Jan 1, 2011 3:35pm
You can use the 123 for position building in a trend but the way paulus is using it is to find reversals, he looks for the reverse after each successful trade.

Perhaps you should just read this thread from the beginning.
Or you can start here with Paulus's posts.
  • #640
  • Jan 1, 2011 3:55pm Jan 1, 2011 3:55pm
The link is broken. But he explained his rules here http://www.forexfactory.com/showpost...8&postcount=48

It's on page4.

I feel so dumb but I don't think I know it fully. People said something about trend-following in 123 on that page? But whenever 123 forms, it looks always reversal just like Paulus doing?
A successful trading depends on knowing what to analyze.
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