How to use the 123 strategy effectively

hi cw, would you mind elaborating on this, please... if i read you correctly, does this mean that you are, let's say, long on a 123 setup, and at same time short on a 2B? this is how i did it earlier, and i was wondering if it was correct or not.
thanks

sorry that I'm confusing you, it's not my intention.

if i wasn't concerned with the resistance at 60-65 then I would also be long under conventional scenario. So I basically just stopped out on the initial short position and was happy to watch it go higher and then look for a selling opportunity at the conventional 1:1 tp area. If the sl point, or the long entry point was above this resistance then I would have put in a stop n reverse trade to go long...


The small 2B entry (and they are still quite risky) showed it's head and the R:R was too good to ignore....

ok, thanks...i have closed the long g/u 123 trade at -5 pips, not comfortable with nfp, now flat

i've left a couple of buy stops in audusd and eurusd in case figures are bearish us$

What does everyone think of those post news gaps and spikes... see USDCHF (just one example of many). This is why NFP's can be so dangerous. Mixed data but unempoyment rate dropped which is good for US. Let's see what direction all of the pairs choose.

All those gaps and spikey long candles make all the pairs somewhat untradable at the moment using patterns IMHO.

GBPUSD just busted up out of upper trend line for those that use these in their trading...

My first and probably only trade of the day (not beautiful but a set-up none the less)... Friday's are tough enough to trade but NFP can be killers (especially when pattern trading)... this is one example when if you are trading pure set-ups with no use of trend lines, support, resistance etc... you still need to be very aware of news releases so that you either avoid trading that day or close all positions regardless of where they stand as these spikes are great SL hunters.

SL at point 3, TP at 138.2. Let's see if she gets there. There is some room up between the earlier broken TL and the next one above (around 5590).

TP hit... up 5% on NFP day... I consider myself very lucky.

Too choppy and sloppy for me today, I only have 1 short in place and it's from a long term daily position.
I'm done for the week.

Me too but that GBPUSD long just looked to obvious not to take after that upper trend line break. Have a great weekend.

same as audusd...what goes up must come down...

My brokers charts has a double top on AUDUSD so I stayed away since I had no 123 and no failed higher high for a 2B set up.

A couple of shorts I just stumpled accross when checking charts... didn't take either but many pairs are killing the EUR today. That will be an interesting thing to see... which currency will end up being the weakest this year? EUR or USD? Many are predicting that USD will be used to buy into riskier assets, gold, oil, stocks etc (all of which normally weakens the USD)... But man the EUR is a mess.

Hi ChinaWombat,

I think we saw 3 times a 2B short setup that morning - some call this a three push pattern.

I did not enter on the LH 123 from 14:30 because the PB was only two bars (but looked like a nice swing though).
Would be nice to have a consistent rule for this but... not everything is black and white - more a shade of gray.

Have you considered trapped traders in your trading yet - if not have a look at the attached chart.

The more setups opposite to your intended trade direction the more stops gather below/above key areas of the chart, where your entry order should go. The stop orders will drive price towards TP .

Have a nice weekend.

Cheers

Thomas

just to follow up upon this

a quick overview of the audusd on friday night (my time). it shows that even if you get the count wrong at the beginning of the day then the market will guide you back to the right count if you let it.....

refer 15m chart

prior to the NFP the 1-2 count is in place, so the buy stop is at 2. NFP comes out and we pop below 1 (which may invalidate the count but considering it was at an economic release then I'll be flexible on this) resulting in a simple 1:1 tp

We wait for a top to form which could be our 1 (marked 1a), we have a possible top, then our 2 sets up at 2a. There is a second attempt at the 1a high, so a stopsell is placed at 2a. A basic 1:1 tp is done.

Looking at the low of the NFP then this gives a possible bullish 1 count (marked as 1b) which runs up to the high at 2b, which becomes our new 2 point. Due to the length of the rally candle we now have what is known as a Gartley 222 (pattern 1). This was mentioned in 1935 and is still applicable 75 years later. It is also the basis of the Trader Vic's 123 set-up. We have the first significant rally.

There are two ways to play this 1-2-3 set-up. The first is the conventional entry above the 2 point ie 2b. The more aggressive (ie risky) strategy is to draw a trend line along the downtrend resistance (the more points of contact the better) and try to enter on any pullback to the line. Sometimes there is no close pull back to the line and you have no choice but to enter at 2.

I left a buy order and went to bed expecting Sydney to have a crack at it in their morning. However it got set in late ny time so we're now long.

refer 1H chart

Possible scenarios

1. Sydney comes in and does slam it lower on Monday to stop me (so no need to read further), or

2. there is, on the 1H chart, a 123 reversal sell either prior to, or at a retest of the NY high, in that case we will take the trade and square up, and go short, in line with our trading the wave strategy, or

3. there is a test of the NY highs (with no 123 bearish set-ups prior) and there is a break of 2. In this case we have a conventional 123 set-up and should be looking at price targets that are marked as 123 and Vic123 (I'm not fussy, I'll take the first target ) which is a 5:1 RR.

3a. We keep an eye out for a 2B set-up in case there is a failure at 2. In this case we would square up and go short, as per scenario 2.

This also coincides with a 50% retrace of the multi-decade high so we should expect some resistance up here. The fibo .618 (50% isn't a fibo number in case your were wondering) is above the 123Vic so any greedy thoughts should be banished well before here.

So thats basically the 1H strategy for early next week. After the moves on Friday night possibly there maybe a few shell shocked traders out there so they may not want to do much on Monday and just catch their breath. So we could be just range bound for a few sessions.

Hope this didn't bore you or confuse you...

I'm not clear on these 2B setups your talking about. Is there some place I can do a little more reading about them?
Thank's

see post #831, basically a failure (with specific trading conditions) of an ABC continuation trade

still holding the daily

Minut draw down on this trade at the circle

nearly at TP with swing low gone ..posted this trade as I took it

Up 530 pips so far

P

I like these setups very much and will be looking at them next week..although I will build in some rules

P