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How to use the 123 strategy effectively

  • #761
  • Jan 5, 2011 7:03am Jan 5, 2011 7:03am
stopped out -5%...i hope i didn't miscalculate spread on this one
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  • #762
  • Jan 5, 2011 7:21am Jan 5, 2011 7:21am
...and a really quick loser on E/U....a nice looking 1-2-3 had formed with two candles in between each point (although the point 2 line was breached withthe same candle that made point 3...any rules about that situation?)

http://i13.photobucket.com/albums/a2...n520110002.jpg

...as you see, I've got SMA 50, and I've found that is a good indicator of trend....I guess the downward trend is too strong at the moment...back to up 9%....

Jeff
  • #763
  • Jan 5, 2011 7:51am Jan 5, 2011 7:51am
Quoting stljeffbb
...

...as you see, I've got SMA 50, and I've found that is a good indicator of trend....
Jeff
Jeff, by definition the 1-2-3 is always going to be against the trend....you don't need a sma to tell you the trend, just look at price, and well done on the +9% so far!
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Catching a falling knife, no, I'm just trading the Gartley!
  • #764
  • Jan 5, 2011 8:08am Jan 5, 2011 8:08am
Quoting ChinaWombat
Jeff, by definition the 1-2-3 is always going to be against the trend....you don't need a sma to tell you the trend, just look at price, and well done on the +9% so far!
Thanks ChinaWombat....yes, I guess I do not need a trendline....the SMA 50, along with EMA 10 and 21, are actually some signals for scalping....I guess I'm used to seeing the markets through "those" glasses.....I'm still playing with the 1-2-3...haven't finished my analysis of E/U, and I'm still in semi-vacation mode....what I want to do is find four pairs that I like and trade them....G/U spread with OANDA is just a bit too large for me, especially for lower pip trades....

Regards,

Jeff
  • #765
  • Jan 5, 2011 8:17am Jan 5, 2011 8:17am
Quoting stljeffbb
Thanks ChinaWombat....yes, I guess I do not need a trendline....the SMA 50, along with EMA 10 and 21, are actually some signals for scalping....I guess I'm used to seeing the markets through "those" glasses.....I'm still playing with the 1-2-3...haven't finished my analysis of E/U, and I'm still in semi-vacation mode....what I want to do is find four pairs that I like and trade them....G/U spread with OANDA is just a bit too large for me, especially for lower pip trades....

Regards,

Jeff
Hi Jeff

I am also sort of in the same boat.....I like to trade 1-2-3 reversals.....but I also like to trade with the trend.

Paulus does this long-short-long-short thing....and it sure works great for him....but some days like today.....it would pay to trade with the trend

I have not sorted this out 100% in my trading plan

PGPB
  • #766
  • Jan 5, 2011 8:25am Jan 5, 2011 8:25am
didn't post this earlier because i didn't want to confuse anybody with the entry..i tried an aggressive entry 1 pip below pinbar at 61.8% retrace ..+5%
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  • #767
  • Jan 5, 2011 8:27am Jan 5, 2011 8:27am
Just entered on this EURUSD long so lets see how this one works out. Only on demo at the moment.
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Dream big, start small. Have it all
  • #768
  • Edited 8:54am Jan 5, 2011 8:32am | Edited 8:54am
Why are some 123s better?

Here is the answer:

Signs of strength of the first leg of a reversal

+ Strong reversal bar
+ Began as a reversal from an overshoot of a trend channel
line from the old trend
+ Reverse a significant swing high or low (such as breaking
below a strong prior swing low and reversing up).
+ Break well beyond the trendline of the old trend.
+ Break above the last Lower High of the prior bear or Higher
Low of the prior bull.
+ The first leg lasts many bars and reverses many bars of
the prior trend.
+ Trending anything: closes, highs, lows, or bodies.
+ Small pullbacks, especially if only sideways.
+ Bars with tiny or no tails in either direction.

from the book: Reading Price Charts Bar by Bar - Al Brooks

Cheers

Thomas
  • #769
  • Jan 5, 2011 9:17am Jan 5, 2011 9:17am
Quoting pgpb
Hi Jeff

I am also sort of in the same boat.....I like to trade 1-2-3 reversals.....but I also like to trade with the trend.

Paulus does this long-short-long-short thing....and it sure works great for him....but some days like today.....it would pay to trade with the trend

I have not sorted this out 100% in my trading plan

PGPB
I also trade them both ways and it works for me. You just have to plan each trade and determine if you are going to trade just one or both. Trading just reversals for example the plan is clear, short, then long etc...

Trading continuations you need a reason why you feel that price will continue down and not reverse. The nice thing about trading 123's is that once you get confortable with them you can set your point 1 and 2 for both the reversal and for the continuation and let PA tell you which one will win. Everytime a leg builds against the trend I am open to it being for either a reversal start or just a retracement pause before continuing on it's path.

This is of course the way I trade 123's and will not work nor will be right for everyone else. There are definately several ways to skin this 123 cat... you just need to find the one that works for you.
Today's zone = Tomorrow's opportunity!
  • #770
  • Jan 5, 2011 9:32am Jan 5, 2011 9:32am
Long trade taken... TP hit.
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Today's zone = Tomorrow's opportunity!
  • #771
  • Jan 5, 2011 9:42am Jan 5, 2011 9:42am
Quoting pres78
Long trade taken... TP hit.
Same here. I notice that you used a different SL to Paulus (below the 3 rather than the 1) which gives you a better R:R. Is that always the case or do you determine your SL by any other method?
Dream big, start small. Have it all
  • #772
  • Jan 5, 2011 9:46am Jan 5, 2011 9:46am
Ive sat out alot today waiting for signals but I never beat myself up about it

Ok we have a great down trend and I got do pips from it but that cuts both ways I didnt lose either and there were no signals so Im ok with that

'lion in the long grass dont forget '

Trades today

Just got TP on eu long 123 picked bottem absolutely perfectly for 27pips
Nice GU short for 68 pips

up 10% or if your pip counting 95 pips
  • #773
  • Jan 5, 2011 9:49am Jan 5, 2011 9:49am
Quoting sean007
Same here. I notice that you used a different SL to Paulus (below the 3 rather than the 1) which gives you a better R:R. Is that always the case or do you determine your SL by any other method?
Nope same R:R (1:1) I match the fib retracement to the TP level. On this trade the retrace was down to the 38.2 level (based on how I draw my fibs with 100 always on top) so my TP was 161.8 giving me a 1:1. All this means is that I will hit my TP sooner but also my SL since it has less room to breathe.

I do trade sometimes using point 1 as my SL shooting for full 100% fib as target for TP if I don't like the PA as much and want the trade to have room to breath. If I feel it is a nice clean set-up and good PA (in my eyes) I will use the retracement values.
Today's zone = Tomorrow's opportunity!
  • #774
  • Jan 5, 2011 9:50am Jan 5, 2011 9:50am
Quoting Paulus
Ive sat out alot today waiting for signals but I never beat myself up about it

Ok we have a great down trend and I got do pips from it but that cuts both ways I didnt lose either and there were no signals so Im ok with that

'lion in the long grass dont forget '

Trades today

Just got TP on eu long 123 picked bottem absolutely perfectly for 27pips
Nice GU short for 68 pips

up 10% or if your pip counting 95 pips
A profitable day with few trades is better than a loss day with many... Great trading.
Today's zone = Tomorrow's opportunity!
  • #775
  • Edited 4:50pm Jan 5, 2011 9:55am | Edited 4:50pm
Quoting pres78
Long trade taken... TP hit.
Caught that one too....2 winners and 1 loser for almost a 2% gain today....

Regards,

Jeff
  • #776
  • Jan 5, 2011 10:01am Jan 5, 2011 10:01am
Quoting stljeffbb
Caught that one to....2 winners and 1 loser for almost a 2% gain today....

Regards,

Jeff
Good day then. Even 2% a day compounds nicely.
Today's zone = Tomorrow's opportunity!
  • #777
  • Jan 5, 2011 10:04am Jan 5, 2011 10:04am
Watching to see what this one does...
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Today's zone = Tomorrow's opportunity!
  • #778
  • Jan 5, 2011 10:11am Jan 5, 2011 10:11am
Quoting pres78
Watching to see what this one does...
A little wary about that 5510 break out level... 5 - 5min candles all hit and stopped at that level... a break and hold should signal some nice upside gains IMHO...
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Today's zone = Tomorrow's opportunity!
  • #779
  • Jan 5, 2011 10:15am Jan 5, 2011 10:15am
Quoting pres78
A little wary about that 5510 break out level... 5 - 5min candles all hit and stopped at that level... a break and hold should signal some nice upside gains IMHO...
Hi Pres

So on that basis, will you wait for a break of the level with a closed candle , or with a retrace back to the 5510 , or will you simply enter a trade when price goes past 5510?

Loving this thread, by the way. Great stuff!
  • #780
  • Jan 5, 2011 10:20am Jan 5, 2011 10:20am
Quoting Delite
Hi Pres

So on that basis, will you wait for a break of the level with a closed candle , or with a retrace back to the 5510 , or will you simply enter a trade when price goes past 5510?

Loving this thread, by the way. Great stuff!
Not sure just yet, I will watch PA as it approches the level to see if there is any visible interest in taking out the level. If it seems buyers are in control I will buy the break otherwise I may wait for the old Ross Hook break, retrace and then buy the breakout of new point 2. If I buy the initial break I will use point 1 as SL to give this trade some room.

We are also getting close to close of US session and London is already gone so PA could be slow anyway.

If the break doesn't happen within the next 1 - 1.5 hours I will call it off...
Today's zone = Tomorrow's opportunity!
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