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How to use the 123 strategy effectively

  • #1,221
  • Feb 11, 2011 10:10am Feb 11, 2011 10:10am
Quoting simpletrades
so your stops are the dist 1-2 not 2-3 or clearly you'd have been stopped out on the first retrace.
Yes, my SL is 1 pip below under 1 and I enter 1 pip above 2. R:R = 1:1.

BTW, the trade was a winner! +27 pips profit at the 100% extension.
Attached Image (click to enlarge)
Click to Enlarge Name: gu_m5_long_123.jpg Size: 64 KB
  • #1,222
  • Feb 11, 2011 10:25am Feb 11, 2011 10:25am
Quoting Olarion1975
Yes, my SL is 1 pip below under 1 and I enter 1 pip above 2. R:R = 1:1.

BTW, the trade was a winner! +27 pips profit at the 100% extension.
I'll be following along here...nice trade Olarion.

Question: Why do you not trade the 123 on a higher TF like 30M or 1H?

Also, I've read that a .pdf file on the 123 that states using the Fib Expansion tool is a good way to set TP areas. Is that what you are doing?
  • #1,223
  • Feb 11, 2011 11:28am Feb 11, 2011 11:28am
Quoting pilotui
I'll be following along here...nice trade Olarion.

Question: Why do you not trade the 123 on a higher TF like 30M or 1H?

Also, I've read that a .pdf file on the 123 that states using the Fib Expansion tool is a good way to set TP areas. Is that what you are doing?
Thanks. I never tried higher TF because of the higher SL and I like to be in and out the trade more quickly.

Yes, I use the fib extension for my TP. In this case I look for the 100% extension from point 1 to 2.
  • #1,224
  • Feb 11, 2011 12:03pm Feb 11, 2011 12:03pm
Quoting pilotui
I'll be following along here...nice trade Olarion.

Question: Why do you not trade the 123 on a higher TF like 30M or 1H?

Also, I've read that a .pdf file on the 123 that states using the Fib Expansion tool is a good way to set TP areas. Is that what you are doing?
Hello Pilotui

Is that related to Bobokus' thread? Could you post the pdf, by any chance?

Good to have you along!
  • #1,225
  • Feb 11, 2011 12:44pm Feb 11, 2011 12:44pm
Quoting Olarion1975
Thanks. I never tried higher TF because of the higher SL and I like to be in and out the trade more quickly.

Yes, I use the fib extension for my TP. In this case I look for the 100% extension from point 1 to 2.
That makes sense. Do you get a lot of small profit trades though?

Here is the PDF I was referring to.

I'll keep following along!
Attached File(s)
File Type: pdf 123.pdf   95 KB | 1,003 downloads
  • #1,226
  • Feb 12, 2011 5:30am Feb 12, 2011 5:30am
What an interesting thread, can someone just clarify one thing to me, from the attached image are we measuring 61.8 fib from 2 to 3,
not 1 to 3, in other words 2 to 3 has to be a minimum 61.8% of 1 to 2?
Hope that makes sense!
Attached Image (click to enlarge)
Click to Enlarge Name: 1.gif Size: 13 KB
  • #1,227
  • Feb 12, 2011 6:24am Feb 12, 2011 6:24am
Good explanation on 123 formation

Attached File(s)
File Type: pdf 123 Formation.pdf   49 KB | 1,212 downloads
  • #1,228
  • Feb 12, 2011 6:31am Feb 12, 2011 6:31am
Quoting forex1962
What an interesting thread, can someone just clarify one thing to me, from the attached image are we measuring 61.8 fib from 2 to 3,
not 1 to 3, in other words 2 to 3 has to be a minimum 61.8% of 1 to 2?
Hope that makes sense!
Here are paulus' rules from post #48

Its just price action but you need some rules mine are simple

  1. I start looking for 123 at 7am uk time on...not before
  2. if we are going up in the Asian session I look for a short and visa versa
  3. I always take trend reversals not continuation of trends
  4. If I take a short 1st thing then the rest of my trades go long short long short etc
  5. I must have more than 1 candle in between 1 and 2 and 2 and 3
  6. The pull back or rally from 2 to 3 must reach the 61.8% of the 1 to 2 move
  7. My stop loss now goes 1pip below or above 1
  8. My TP is always the distance from 1 to 2

  • #1,229
  • Edited 7:07am Feb 12, 2011 6:54am | Edited 7:07am
Quoting simpletrades
Here are paulus' rules from post #48

Its just price action but you need some rules mine are simple[list=1][*]I start looking for 123 at 7am uk time on...not before[*]if we are going up in the Asian session I look for a short and visa versa[*]I always take trend reversals not continuation of trends[*]If I take a short 1st thing then the rest of my trades go long short long short etc[*]I must have more than 1 candle in between 1 and 2 and 2 and 3[*]The pull back or rally from 2 to 3 must reach the 61.8% of the 1 to 2 move[*]My...
Thank you, sorry to be a bit slow but I want tobe absolutely clear here, would the trade in the pic attached not be valid as 2 has not retraced 61'8%? or have I got the fibs the wrong way round, please see next pic
Attached Image (click to enlarge)
Click to Enlarge Name: 2.gif Size: 14 KB
  • #1,230
  • Feb 12, 2011 7:06am Feb 12, 2011 7:06am
Would this be right?
Attached Image (click to enlarge)
Click to Enlarge Name: 2.gif Size: 15 KB
  • #1,231
  • Feb 12, 2011 7:49am Feb 12, 2011 7:49am
Draw Fibo this way - you have the 61,8 + 200 %

P.P But I don't think, Friday afternoon is the best time for trading
Attached Image (click to enlarge)
Click to Enlarge Name: 11-3.jpg Size: 82 KB
  • #1,232
  • Feb 12, 2011 8:06am Feb 12, 2011 8:06am
Quoting Happy68
Draw Fibo this way - you have the 61,8 + 200 %

P.P But I don't think, Friday afternoon is the best time for trading
Thank you, so the retrace would have to reach the yellow (so in effect the retrace has to be at least 38.2%) and the blue is your TP.
Is 1 or 3 the stop as people seem to vary on this one?
  • #1,233
  • Feb 12, 2011 8:13am Feb 12, 2011 8:13am
Quoting Happy68
Draw Fibo this way - you have the 61,8 + 200 %

P.P But I don't think, Friday afternoon is the best time for trading

On your chart this is not a 61.8% retrace, this is a 38.2% retrace, you have drawn your fibs the other way round.
Regards
  • #1,234
  • Feb 12, 2011 8:38am Feb 12, 2011 8:38am
I think Paulus draws his fibs starting at point 2 and ending at point 1. Some of his charts are at posts #605, 486 and 489.
  • #1,235
  • Feb 12, 2011 9:09am Feb 12, 2011 9:09am
Thanks Guys I think I get it, at least 38.2 retrace, stop a couple of points under the 3 (long) and first tp value of 1-2 then move stop up to 2 and so on..............only problem finding the reversals!
  • #1,236
  • Feb 12, 2011 2:55pm Feb 12, 2011 2:55pm
Hello tomd no Paulus draws his fibos starting from point 1 to 2. if you look his charts is clear that its from 1 to 2, because its over 50% from 1 to 2

Its just price action but you need some rules mine are simple

  1. I start looking for 123 at 7am uk time on...not before
  2. if we are going up in the Asian session I look for a short and visa versa
  3. I always take trend reversals not continuation of trends
  4. If I take a short 1st thing then the rest of my trades go long short long short etc
  5. I must have more than 1 candle in between 1 and 2 and 2 and 3
  6. The pull back or rally from 2 to 3 must reach the 61.8% of the 1 to 2 move
  7. My stop loss now goes 1pip below or above 1
  8. My TP is always the distance from 1 to 2

  • #1,237
  • Feb 12, 2011 3:08pm Feb 12, 2011 3:08pm
Hello.

I wonder does anyone has his one rules that the pull back or rally from 2 to 3 must reach the 38.2% of the 1 to 2 move, and are there better results of hitting the TP let say the fibo 200 line, then if the rule is the pull back or rally from 2 to 3 must reach the 61.8% of the 1 to 2 move?

Best wishes,

D.
  • #1,238
  • Feb 12, 2011 3:56pm Feb 12, 2011 3:56pm
Quoting danel
Hello tomd no Paulus draws his fibos starting from point 1 to 2. if you look his charts is clear that its from 1 to 2, because its over 50% from 1 to 2


Its just price action but you need some rules mine are simple[list=1][*]I start looking for 123 at 7am uk time on...not before[*]if we are going up in the Asian session I look for a short and visa versa[*]I always take trend reversals not continuation of trends[*]If I take a short 1st thing then the rest of my trades go long short long short etc[*]I must have more than 1 candle in between...
baisically on a short the 3 highpoint must reach almost 1/3 of the way back up from 2 towards 1 thats the 61.8%
  • #1,239
  • Feb 12, 2011 4:18pm Feb 12, 2011 4:18pm
Yes I think thats it, it's basically a 38.2 retrace, but where does the stop go is it 1 or 3?
  • #1,240
  • Feb 12, 2011 4:28pm Feb 12, 2011 4:28pm
Quoting forex1962
Yes I think thats it, it's basically a 38.2 retrace, but where does the stop go is it 1 or 3?
Hi,

the stop for me is always 1 pip above/below point 1 - otherwise you get stopped out too often.

Cheers.
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