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How to use the 123 strategy effectively

  • #1,081
  • Jan 24, 2011 5:57pm Jan 24, 2011 5:57pm
Quoting Paulus
Oi ! .. You be careful with my attachments ...lols

----------------------------------

EU 5min today 2b long Winner 123 short from 1.3645

GU 5min today 2b long Winner,2b long winner
and a 123 which was a winner but didn't take as 2b long already in play
Now short 123 from 1.5984
Hi Paulus, thanks for posting your charts and can you say why you didn't take the possible 2Bs I've marked on the 2 charts. Was it because there was no trendline break?
thanks
Sean
Attached Image(s) (click to enlarge)
Click to Enlarge Name: paulus 2b setups.gif Size: 20 KB
Click to Enlarge Name: paulus 2b setup2.gif Size: 22 KB
Dream big, start small. Have it all
  • #1,082
  • Jan 24, 2011 6:49pm Jan 24, 2011 6:49pm
Hi,

Actually there were three 2b setups after 7GMT.

The trend changed after the third push down (orange circle). This was also a climax as it overshot two trend channel lines.

On top of that it tested the entry of Fridays 123 (see green rectangle).

And a bunch of 123 traders from Sunday night took profit as well (see fib)

Cheers

Thomas

Quoting sean007
Hi Paulus, thanks for posting your charts and can you say why you didn't take the possible 2Bs I've marked on the 2 charts. Was it because there was no trendline break?
thanks
Sean
Attached Image (click to enlarge)
Click to Enlarge Name: gu.jpg Size: 126 KB
  • #1,083
  • Jan 24, 2011 8:14pm Jan 24, 2011 8:14pm
Quoting tdeu
Hi,

Actually there were three 2b setups after 7GMT.

The trend changed after the third push down (orange circle). This was also a climax as it overshot two trend channel lines.

On top of that it tested the entry of Fridays 123 (see green rectangle).

And a bunch of 123 traders from Sunday night took profit as well (see fib)

Cheers

Thomas
and all the 2b's would have been profitable for at least 1:1, even higher..

attached is a link to a script that i've found quite handy if you want to do mutliple (or just a single) entry. It avoids the manual calculation of lot size so you just put in your entry price, number of entries, % of risk per entry, and it will do all the calcs itself. very handy if your doing gbp, chf or jpy based trades.

I like to have 1:1,2:1, and 3:1 targets for a third of total risk each but it's an individual choice. It only has one entry for take profit target but you can manually alter that (if you wish) once the pending order has been sent.

Please try it on demo first to make sure you're comfortable with it first (if you decide to use it)

http://www.forexfactory.com/showpost...24&postcount=6
Catching a falling knife, no, I'm just trading the Gartley!
  • #1,084
  • Jan 25, 2011 12:21am Jan 25, 2011 12:21am
I just can't seem to grasp the 2b I got 123 down perfect. Making good demo dollars now. Maybe some more examplies and I'll get it.
  • #1,085
  • Jan 25, 2011 1:50am Jan 25, 2011 1:50am
Quoting tommbstone
I just can't seem to grasp the 2b I got 123 down perfect. Making good demo dollars now. Maybe some more examplies and I'll get it.
A 1 2 3 set up is a test of a level and failure to hit that level again. The 3 point is the failure, it makes a lower high or higher low.

Think of the 2b in terms of test and failure. Instead of the 3 point not reaching previous levels in a 2b it overshoots a few pips and rejects quickly. So it would make a slightly higher high, or slightly lower low and get rejected.

High chance of seeing a hammer or shooting star at those extremes.
  • #1,086
  • Jan 25, 2011 2:06am Jan 25, 2011 2:06am
Quoting tommbstone
I just can't seem to grasp the 2b I got 123 down perfect. Making good demo dollars now. Maybe some more examplies and I'll get it.
Take a look at this 15min chart... Basically they are a failed 123 set-up. The example shows per Paulus method. There was an upmove to the left so we looked for a short 123, it failed we grabbed a 2B and started to look for another 123 short which also failed but we got into another 2B. This is on a 15min though and Paulus trades on the 5min mainly... also the first set-up would be too early in the trading day but I cherry picked this as it is quite clear.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd 1.gif Size: 30 KB
Today's zone = Tomorrow's opportunity!
  • #1,087
  • Jan 25, 2011 2:39am Jan 25, 2011 2:39am
eurusd & eurjpy 123's complete first tp target
Catching a falling knife, no, I'm just trading the Gartley!
  • #1,088
  • Jan 25, 2011 4:19am Jan 25, 2011 4:19am
This 123 system is a funny thing you know. It's so simple that it escaped me when I first looked at it. But now with all those helping charts and a realization that it works just like an auction - going 1st time, going 2nd time, going 3rd time, sold to the highest bidder (breakout/breakdown) it seems so very simple. Along the same lines, the 2b setup can be thought of as a fake bid in an auction. I don't know if this auction analogy helps anyone here at all, but I thought I'd bring it out.
If you don't risk, you don't ever have to lose.
  • #1,089
  • Jan 25, 2011 4:32am Jan 25, 2011 4:32am
Sorry for the stupid question, but what is the 123 strategy? (blush)
  • #1,090
  • Jan 25, 2011 4:57am Jan 25, 2011 4:57am
Quoting iFX
Sorry for the stupid question, but what is the 123 strategy? (blush)
Look back at the charts posted and it should be become apparent. If after taking the time to look at the charts even just on the last 30 or so pages you still have questions then feel free to ask.
Today's zone = Tomorrow's opportunity!
  • #1,091
  • Jan 25, 2011 4:57am Jan 25, 2011 4:57am
Quoting iFX
Sorry for the stupid question, but what is the 123 strategy? (blush)

Have a look at this

http://www.trading-naked.com/123-reversal.htm

And then read the thread from the beginning.

Good luck!
  • #1,092
  • Jan 25, 2011 6:10am Jan 25, 2011 6:10am
I have taken 1, 123 and 2, 2B set-ups per attached. Wasn't able to get in on any pattern trades on EURUSD or GBPUSD... man that GBPUSD pair just tanked today...
Attached Image(s) (click to enlarge)
Click to Enlarge Name: eurchf 2b.gif Size: 19 KB
Click to Enlarge Name: eurjpy 2b.gif Size: 19 KB
Click to Enlarge Name: eurgbp long.gif Size: 16 KB
Today's zone = Tomorrow's opportunity!
  • #1,093
  • Jan 25, 2011 6:32am Jan 25, 2011 6:32am
Quoting pres78
Take a look at this 15min chart... Basically they are a failed 123 set-up. The example shows per Paulus method. There was an upmove to the left so we looked for a short 123, it failed we grabbed a 2B and started to look for another 123 short which also failed but we got into another 2B. This is on a 15min though and Paulus trades on the 5min mainly... also the first set-up would be too early in the trading day but I cherry picked this as it is quite clear.
Thanks for this explanation Pres, it's made it much clearer . . . otherwise you'd get a possible 2B every time a new high (in an uptrend) or new low (in a downtrend) is made. However anyone care to comment on the AUDUSD 2B setups I have marked. Hopefully each one is clear as I've colour coded them. The dotted lines shows the pt 1 breaks and the solid lines show the entries. Here are my thoughts about each one.
1. Yellow: No trendline break as per the link Paulus posted. Does this invalidate the setup. The small red candle after the candle the broke pt 1 made a higher high so does this invalidate the setup? If not how many candles following the break candle are allowed?
2. I would say this one is textbook as the entry candle broke a trendline
3. Orange: same comments as yellow setup
4. Green: No trendline break until after entry but otherwise OK.
I realise we all have to decide on which rules we follow but as I'm new to the 2B setup I'd like to get comments from those who actually trade them
Attached Image (click to enlarge)
Click to Enlarge Name: aud 2b setups 25 jan.gif Size: 21 KB
Dream big, start small. Have it all
  • #1,094
  • Jan 25, 2011 6:45am Jan 25, 2011 6:45am
In light of Paulus' rules I wondered if someone could clarify this for me...

Looking at EU this morning. During Asia we had been in a down trend but then Frankie gave us a quick leg up. Should we have been looking, therefore for longs or shorts?

I realise that sounds so simplistic, but on first glance the short did seem like a reversal, but then I became aware that it was a continuation of Asia.

Any thoughts?
  • #1,095
  • Jan 25, 2011 7:01am Jan 25, 2011 7:01am
Quoting Delite
In light of Paulus' rules I wondered if someone could clarify this for me...

Looking at EU this morning. During Asia we had been in a down trend but then Frankie gave us a quick leg up. Should we have been looking, therefore for longs or shorts?

I realise that sounds so simplistic, but on first glance the short did seem like a reversal, but then I became aware that it was a continuation of Asia.

Any thoughts?
Yes the resistance area below 3700 beat all.
Attached Image (click to enlarge)
Click to Enlarge Name: 1.gif Size: 19 KB
  • #1,096
  • Jan 25, 2011 7:04am Jan 25, 2011 7:04am
Quoting sean007
Thanks for this explanation Pres, it's made it much clearer . . . otherwise you'd get a possible 2B every time a new high (in an uptrend) or new low (in a downtrend) is made. However anyone care to comment on the AUDUSD 2B setups I have marked. Hopefully each one is clear as I've colour coded them. The dotted lines shows the pt 1 breaks and the solid lines show the entries. Here are my thoughts about each one.
1. Yellow: No trendline break as per the link Paulus posted. Does this invalidate the setup. The small red candle after the candle the broke...
I will respond but from my point of view only... others can offer their imput as well.

I checked the link that Paulus posted and in the main 2 images it doesn't mention the need for a treanline break so I am not even sure if that is a specific requirement or not but I do not use trendline breaks as a filter in my 2B trades.

On the yellow trade I am not crazy about all the distance between point one and point 2 although the trade is a good one profit wise. I also odn't usually take 2B's on the 5min as PA moves too quick to get in safely so I stick to mainly taking these on 15min and up.

The one thing I do is if a second candle make a higher high or a lower low than the break candle I adjust my SL and TP values but NEVER adjust my entry as I have seen to many times that the low of the second or third candle is hit but never the original entry capturing you in a bad trade. If it doesn't break that original high or low that triggered the initial trade then I move onto another trade... again this is just me.

Here is another link with some more info on 2B set-ups.

http://gugukforex.blogspot.com/p/vics-2b-topbottom.html

He also has a post about a 123 trade variation that uses a trend line break.
Today's zone = Tomorrow's opportunity!
  • #1,097
  • Jan 25, 2011 7:06am Jan 25, 2011 7:06am
Quoting Delite
In light of Paulus' rules I wondered if someone could clarify this for me...

Looking at EU this morning. During Asia we had been in a down trend but then Frankie gave us a quick leg up. Should we have been looking, therefore for longs or shorts?

I realise that sounds so simplistic, but on first glance the short did seem like a reversal, but then I became aware that it was a continuation of Asia.

Any thoughts?
My interpretation is that we were downtrending coming out the Asian session so we're looking for longs. Once we made a new high then we're looking for shorts. Once we make new lows we then look for longs again whether we get any entries for our previous direction or not. I've attached a chart showing this with some possible entries but I realise all the 123 setups apart from the last one don't qualify because of the number of candles between pts 2 and 3
Attached Image (click to enlarge)
Click to Enlarge Name: eur 25th jan setups.gif Size: 20 KB
Dream big, start small. Have it all
  • #1,098
  • Jan 25, 2011 7:30am Jan 25, 2011 7:30am
Here is another link with some more info on 2B set-ups.

http://gugukforex.blogspot.com/p/vics-2b-topbottom.html

He also has a post about a 123 trade variation that uses a trend line break.[/quote]


Thanks for that link Sean. The 2B entry has been elusive to me, but that is just about the simplest example that a fella could wish for.

Joe
  • #1,099
  • Jan 25, 2011 7:30am Jan 25, 2011 7:30am
Quoting pres78
I will respond but from my point of view only... others can offer their imput as well.

I checked the link that Paulus posted and in the main 2 images it doesn't mention the need for a treanline break so I am not even sure if that is a specific requirement or not but I do not use trendline breaks as a filter in my 2B trades.

On the yellow trade I am not crazy about all the distance between point one and point 2 although the trade is a good one profit wise....
Thanks for the comments and I agree the 1st (yellow) setup is better suited to a 1 hour and then isn't really a 2B as point 1 isn't the high of the move. The problem I've found with the 2B setups that give a subsequent higher (in the case of a short 2B) candle after the break is that a there are a lot more failures as the price has to move a lot further to get your entry and then to hit your profit of 1:1. Maybe this is where a trendline break keeps you out of those. I've attached the chart from Paulus' link which mentions the trendline break requirement
Attached Image (click to enlarge)
Click to Enlarge Name: testb2.jpg Size: 180 KB
Dream big, start small. Have it all
  • #1,100
  • Jan 25, 2011 7:41am Jan 25, 2011 7:41am
Quoting sean007
Thanks for the comments and I agree the 1st (yellow) setup is better suited to a 1 hour and then isn't really a 2B as point 1 isn't the high of the move. The problem I've found with the 2B setups that give a subsequent higher (in the case of a short 2B) candle after the break is that a there are a lot more failures as the price has to move a lot further to get your entry and then to hit your profit of 1:1. Maybe this is where a trendline break keeps you out of those. I've attached the chart from Paulus' link which mentions the trendline break requirement...
I guess in hindsight you should always have a trendline break if you have a nice retrace between the point 1 and point 2B... I have never considered it before so I guess I have been lucky. I do prefer to see a healthy retrace before a 2B set-up which is why I like 15min and up charts for them.

Also if you move your entry to the low (or high) of a second or third candle after the break you have taken your original point 1 out of the picture and are now trading a 2 candle 2B set-up. If that's what you are trading then you would be using the body of the second candle for SL and TP... me like I said I always use the original candles low (of the first candle to break and close above point 1) that caused the set-up.
Today's zone = Tomorrow's opportunity!
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