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How to use the 123 strategy effectively

  • #1,101
  • Edited 8:48am Jan 25, 2011 8:32am | Edited 8:48am
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...
you're better off reading trader vic's method directly or use the guguk description. the trend line isn't required. use suri dudella's entry method if in doubt. you should make more pips in a 2b than in conventional 123, as you're entering usually before the 2 and 3 are established, and your targets are usually at least 1:1 risk, more likely 2,3 or 4. However as it's picking tops and bottoms under the false break/ stop hunt it can have a higher failure rate, which is more than made up for by the higher R:R

the trend line is for trader vic's 123's but you can see that it doesn't need to be included to be successful as with paulus method. see what works for you and make it your own with your own adjustments...

also look for prior S/R in the background as these provide ideal points to allow anticipation of where false breaks versus valid break can take place

there is plenty of information already in this thread... please don't try to find complications in a simple strategy
Catching a falling knife, no, I'm just trading the Gartley!
  • #1,102
  • Jan 25, 2011 10:50am Jan 25, 2011 10:50am
Sean and Vantage - thank you for your replies.
  • #1,103
  • Jan 25, 2011 12:19pm Jan 25, 2011 12:19pm
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
Hi when the bar breaks the 1 count..it has to close below it not just break it..all my 2b's break and close below the 1 for a long and above the 1 for a short

Im confused on the 2nd chart ??

Cheers

P
  • #1,104
  • Jan 25, 2011 12:28pm Jan 25, 2011 12:28pm
Currently in this late day short.
Attached Image (click to enlarge)
Click to Enlarge Name: eurjpy.gif Size: 21 KB
Today's zone = Tomorrow's opportunity!
  • #1,105
  • Jan 25, 2011 12:29pm Jan 25, 2011 12:29pm
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?
We were looking for longs and nice looking 123 was there but my rules ruled it out as only 1 bar between 2 and 3 count..we didnt break the Asian hi and prices fell as soon as we went below Asian lo I was be looking for a long and got it for a win I then took a short and it went to within 2 pips of closing me out with another win ( 29pips) but reversed ( at +27 pips) and hit my SL so loser...

Gu a long still in ........needs 1.5835 for a win but account on 0% growth but not a negative so happy
  • #1,106
  • Jan 25, 2011 1:40pm Jan 25, 2011 1:40pm
Quoting pres78
Currently in this late day short.
Price hit -38.2 fib and came within 4 pips of my target. After than 2 bar reversal with a strong down and then a fully engulfing upbar I closed out at BE... no point in taking a loss this late in the day... in hind sight I should have just stopped trading at London close.
Today's zone = Tomorrow's opportunity!
  • #1,107
  • Jan 26, 2011 3:04am Jan 26, 2011 3:04am
Same idea here - don't trade after London close.

Most trades initiated after London Close hit max 162 ext until 22GMT or you have to close them with a loss.

Market maker seems to "step on the brakes" until then. Often price makes it to TP after that within a couple of bars.

There are a lot of trades which would make it to TP overnight.

Cheers

Thomas

Quoting pres78
Price hit -38.2 fib and came within 4 pips of my target. After than 2 bar reversal with a strong down and then a fully engulfing upbar I closed out at BE... no point in taking a loss this late in the day... in hind sight I should have just stopped trading at London close.
  • #1,108
  • Edited 4:27am Jan 26, 2011 3:26am | Edited 4:27am
Read this if you want to move your stop early to some of the fib levels:

"The price is going to go exactly where the stops are. Your risk management is what is often providing liquidity for the market to discover."

from the article "The Importance Of Exits"
can be found here
http://brianhoffmantrading.com/index...page&Itemid=80

That's why it's so important to leave your stop beyond point 1.
Just have a look at overnight PA on GBPUSD M5.
After "just" hitting TP we've been at the 38 and at the 62 level .

EDIT:
and finally we hit our TP from yesterday's 123 long setup

Cheers

Thomas
  • #1,109
  • Jan 26, 2011 5:56am Jan 26, 2011 5:56am
I have not taken any 123 trades today (nor any 2B trades)... PA is rangy at best plus I slept through LO.
Today's zone = Tomorrow's opportunity!
  • #1,110
  • Edited 6:14am Jan 26, 2011 6:02am | Edited 6:14am
all for M5

GBPUSD had a successful long at 1.5809 (only one candle between 2 and 3)

AUDUSD making a whipsaw around the short entry at 0.9972
SL would have not been triggered at 9:00GMT - candle only 0.5 pips higher than point 1

EURUSD would have a short entry at 1.3681
making a whipsaw around S/R at 1.369x

at least both setups in same direction (correlation)

Cheers

Thomas
  • #1,111
  • Jan 26, 2011 6:16am Jan 26, 2011 6:16am
Quoting tdeu
all for M5

GBPUSD had a successful long at 1.5809 (only one candle between 2 and 3)

AUDUSD making a whipsaw around the short entry at 0.9972

EURUSD would have a short entry at 1.3681
making a whipsaw around S/R at 1.369x

at least both setups in same direction (correlation)

Cheers

Thomas

Hello Thomas

I attach my M5 chart for GU - there is definitely more than one candle between 2 and 3. Do you have a different setup?

Hope this choppiness subsides soon.
Attached Image
  • #1,112
  • Jan 26, 2011 7:16am Jan 26, 2011 7:16am
Quoting Delite
Hello Thomas

I attach my M5 chart for GU - there is definitely more than one candle between 2 and 3. Do you have a different setup?

Hope this choppiness subsides soon.
Your chart shows one candle between 2 and 3
Regards
  • #1,113
  • Jan 26, 2011 7:22am Jan 26, 2011 7:22am
Quoting howard
Your chart shows one candle between 2 and 3
D'uh, yes you are quite right. My eyes were drawn to the 3 bar retrace rather than the 1 bar of the high/low.
  • #1,114
  • Jan 26, 2011 8:12am Jan 26, 2011 8:12am
beautiful setup indeed

the two marked candles reverse two strong bearish candles - this makes the setup (in my eyes) much stronger

look where the 2nd candle retraced to and reversed - the area of BE stops of guys who bought the candle after the bounce off the broken TL

Cheers

Thomas


Quoting Delite
D'uh, yes you are quite right. My eyes were drawn to the 3 bar retrace rather than the 1 bar of the high/low.
Attached Image (click to enlarge)
Click to Enlarge Name: gu123.gif Size: 30 KB
  • #1,115
  • Jan 26, 2011 8:56am Jan 26, 2011 8:56am
is this how u do it?
Attached Image
MY OPINION NOT FINANCIAL ADVISE
  • #1,116
  • Jan 26, 2011 9:14am Jan 26, 2011 9:14am
Interesting thread I should say. Using the 123 system correctly can be very profitable, but they are most reliable at key resistance or support zones.

There is also the 1234, the 4 being where to take profit i.e. at a fib level of 1.618

TL
  • #1,117
  • Jan 26, 2011 9:22am Jan 26, 2011 9:22am
Thank you for that very beautiful chart you just posted. Did not see it earlier. You have just opened my eyes to something that I have not noticed before. The break of that down trend line to the left of your chart.

Beautiful set up indeed!

TL
  • #1,118
  • Jan 26, 2011 10:39am Jan 26, 2011 10:39am
Quoting Trendylines
at a fib level of 1.618

TL
measured from where? what's your R:R and probability ratio?
Catching a falling knife, no, I'm just trading the Gartley!
  • #1,119
  • Jan 26, 2011 10:47am Jan 26, 2011 10:47am
Quoting ChinaWombat
measured from where? what's your R:R and probability ratio?

I thought the 4 referred to the point of entry on the 1,2,3 ie the one pip break of the point 2.
  • #1,120
  • Edited 8:43pm Jan 26, 2011 10:57am | Edited 8:43pm
Quoting Delite
I thought the 4 referred to the point of entry on the 1,2,3 ie the one pip break of the point 2.
i have no idea what he was talking about....

50% tp done R:R 1 in audusd, and balance will run at be+1 or tp2 R:R 2


update.

Stop and reverse on new 123 setup
BE+1 trade now. lets see what Asia can do. simple 1:1R
Attached Image(s) (click to enlarge)
Click to Enlarge Name: audusd 123 27jan11.gif Size: 28 KB
Click to Enlarge Name: audusd2 123 27jan11.gif Size: 26 KB
Catching a falling knife, no, I'm just trading the Gartley!
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