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  • #121
  • Jul 15, 2011 8:30pm Jul 15, 2011 8:30pm
Quoting balrog
AFAIK, it's based on the zigzag indicator but not sure of the underlying mechanisms.. maybe somebody on here has a better appreciation of it and can fill in some more detail. Sorry.
Oh OK great. Thanks for that. I can also see that arnold uses the fractal indicator which also helps to spot 123's. Keep up the good work guys
  • #122
  • Jul 15, 2011 8:34pm Jul 15, 2011 8:34pm
Quoting Arnold49
Hi, H4 aud/usd trade going well, got in a little early, as you can see SL is following the 13 EMA
thanks again for putting me onto this method.
Attachment
No problem Arnold let us know how your trades go. Keep posting
  • #123
  • Jul 15, 2011 8:35pm Jul 15, 2011 8:35pm
Quoting PeterE
friday's trades +304: AU, ACa, ECa and EJ each reached TP; NU stopped and EU early end of week exit (demo)

interestingly, the 2 that struggled (NU and EU) were not aligned with my primary analytical tool the median line, both were considered on face value, ie. 123 pivots..........the other 4 trades were each confirmed by the median line

.
Excellent work!
  • #124
  • Jul 15, 2011 11:33pm Jul 15, 2011 11:33pm
Quoting PeterE
hi pups

the boxes designate the 123 (marked yellow below) and the TP

pivot 3 had not yet formed on the AU&EU charts i posted, i used another tool to "estimate" where a pivot may form

all experimental at present, just seeing if i can weave the 123 into the tools i already use

.
1 2 3 formations seem nice in hindsight, but has anybody been able to REALLY backtest them and prove their alleged predictive power? That's the million dollar question
  • #125
  • Jul 15, 2011 11:54pm Jul 15, 2011 11:54pm
Quoting Mr Breakout
1 2 3 formations seem nice in hindsight, but has anybody been able to REALLY backtest them and prove their alleged predictive power? That's the million dollar question
Hi Mr Break out. Take a look back thru the thread all my charts are predictive. Using the 123 in real time. I have been back testing this for years. Do some back testing yourself. You are the only person you should believe whe it comes to your money
  • #126
  • Jul 16, 2011 12:45pm Jul 16, 2011 12:45pm
Quoting puppypippy
Hi Mr Break out. Take a look back thru the thread all my charts are predictive. Using the 123 in real time. I have been back testing this for years. Do some back testing yourself. You are the only person you should believe whe it comes to your money
Hello Puppypippy.

What I am trying to say is that, to the best of my knowledge, no one has been able to "quantify" the 1 2 3 pattern in computer terms so that we can program this pattern and backtest it with 10 or 15 years of historical data and different time frames, from the 1 min time frame up to the monthly bars.

If someone has the exact computer algorithm for the 1 2 3 pattern (in Omega Trade Station Language for example) and/or the backtest I would be glad to see it.

All in all a nice thread Puppypippy, keep up the good work.
  • #127
  • Jul 16, 2011 3:39pm Jul 16, 2011 3:39pm
Quoting Mr Breakout
Hello Puppypippy.

What I am trying to say is that, to the best of my knowledge, no one has been able to "quantify" the 1 2 3 pattern in computer terms so that we can program this pattern and backtest it with 10 or 15 years of historical data and different time frames, from the 1 min time frame up to the monthly bars.

If someone has the exact computer algorithm for the 1 2 3 pattern (in Omega Trade Station Language for example) and/or the backtest I would be glad to see it.

All in all a nice thread Puppypippy, keep up the good work.
OK I know what you mean. You could do it and if you did you would have just made yourself a goose that lays golden eggs. In fact in all likelyhood someone has already coded this. BUT if they were to give it away to everyone it would crash the market! You need to people to lose in Forex for others to make money.

It's fear and greed that send the market up when we put in a buy order that make s our trade successful. It's other peoples stops that send our buy order sky rocketing all of a sudden.

So I guess the answer to your question is that this has all ready been coded and some guy living in a penthouse apartment with a ferrari and a mattress made of cash is enjoying that LOL

If you want to do the same you need to start defining each part of the 123. You need to (for a long trade)...

Define an existing downtrend (you would need to work out how to do that with words rather than just eyeballing it as we do. Are all of those bars under a certain MA or is there another way to qualify a downtrend. Anyone?)

Then you need to extablish the lowest point of that downtrend to estable point 1 of the 123 and that can only be qualified when you have your point 2 and 3 and then break of 2. So to qualify point one you need to qualify point 2 and 3. Put fractals on your chart as they help you identify points. Then look for point two which is a reversal from point one that then reverses to establish point 3 which is another low that reverses but is higher than point 1. You have then estableshed a 123 pattern. If you can code that and put it into an automated system then you have a cash cow BUT

If you give that away or sell it then you have taken out the one thing that makes the system not work. Fear and greed. And if that went viral. You would crash the markets. It would be outlawed and then we could all get back to trading again LOL
  • #128
  • Edited 4:17pm Jul 16, 2011 4:06pm | Edited 4:17pm
Quoting puppypippy
So I guess the answer to your question is that this has all ready been coded and some guy living in a penthouse apartment with a ferrari and a mattress made of cash is enjoying that LOL
Ha ha ha ha, I knew you would say something like this, good point

Quoting puppypippy
Define an existing downtrend (you would need to work out how to do that with words rather than just eyeballing it as we do. Are all of those bars under a certain MA or is there another way to qualify a downtrend. Anyone?)
For backtesting purposes and like you suggested, we could simply define a downtrend like this : If the price is below its 20 and 100 moving average then it is a downtrend, simple as that. Of course we need to determine the right value for the length of the 2 moving averages through intensive backtesting.

Quoting puppypippy
If you can code that and put it into an automated system then you have a cash cow
Cash cow I am not so sure about that, after all a thorough backtest of the 1 2 3 pattern (assuming we can quantify it) could reveal that this pattern only generates 2 to 3% net profit per year on average, no even enough to beat inflation.

Or it could be a real money-maker indeed, who knows...
  • #129
  • Jul 16, 2011 4:22pm Jul 16, 2011 4:22pm
Quoting puppypippy
You need to people to lose in Forex for others to make money.
Yes, but remember that you could be betting against a commercial hedger (like BMW or Boeing) who does not care at all if he is losing or winning in the forex market, he just wants to protect his commercial profits from currency devaluation via his hedging position, period.
  • #130
  • Jul 16, 2011 4:26pm Jul 16, 2011 4:26pm
trading the 123 pattern in isolation no doubt would be a losing strategy
the pattern needs to be well confirmed with a tried and tested indi

and personally, the forward test holds more interest than the back test
  • #131
  • Jul 16, 2011 4:41pm Jul 16, 2011 4:41pm
Quoting PeterE
trading the 123 pattern in isolation no doubt would be a losing strategy
Well that is precisely what we are trying to find out.

Quoting PeterE
the pattern needs to be well confirmed with a tried and tested indi
Excellent point, waiting patiently for a confirmation of a signal is what separates winning traders from losers.

Quoting PeterE
and personally, the forward test holds more interest than the back test
Yes and no, which would you prefer: 5000 backtested historical trades that show a 18% profit/year on average or 50 forward trades that show a 80% profit/year?

Also note that each forward trade becomes necessarily a backtest trade, as the "future" becomes the past
  • #132
  • Jul 16, 2011 4:56pm Jul 16, 2011 4:56pm
I think we can confidently state that the 123 pattern needs to be filtered, blindly taking each is likely to be a losing strategy; raw “experience” alone may qualify as a confirming signal for some

back test, forward test!

I am satisfied to first understand how the strategy works in principle on a few historical examples, and then start the forward test ............it works for me
  • #133
  • Jul 16, 2011 5:03pm Jul 16, 2011 5:03pm
Quoting PeterE
trading the 123 pattern in isolation no doubt would be a losing strategy
the pattern needs to be well confirmed with a tried and tested indi

and personally, the forward test holds more interest than the back test
Hi Peter. I like to think of trading like any other science in that, if it works you should be able to have a set of rules you can aplly to get the same result. Depends how you backtest but I like to think the way I do it is close to live trading. I move forward a bar at a time until I find the patternand just like live trading sometimes it ends in profit sometimes it doesn't. I am always weary of people who say that some method won't work in a backtest but will live. I caught TRO up on that and proved that atleast two of his methods would not work in real time, based on finding I found in a back test which left no doubt that he was simply gambling.
  • #134
  • Jul 16, 2011 5:13pm Jul 16, 2011 5:13pm
A guy I knew who traded the 123 professionally, did so by qualifying them with a break of a trend line and the formation of them around psych lines. Now I always found the breaking os a trend line to be too subjective but it seemed to work for him.

The psych lines however do seem to have some merit. If for nothing else than helping to eye ball a pattern. It does however seem, that 123 patterns will find resistance at these lines. Do your own backtesting and see with the attached indicator
Attached Image (click to enlarge)
Click to Enlarge Name: Jul. 17 07.55.gif Size: 28 KB
Attached File(s)
File Type: mq4 SweetSpotsGOLD.mq4   4 KB | 259 downloads
  • #135
  • Jul 16, 2011 5:17pm Jul 16, 2011 5:17pm
Quoting PeterE
trading the 123 pattern in isolation no doubt would be a losing strategy
the pattern needs to be well confirmed with a tried and tested indi

and personally, the forward test holds more interest than the back test
I find that the 123 pattern on it's own without any indicators wins more than it loses.
  • #136
  • Jul 16, 2011 5:20pm Jul 16, 2011 5:20pm
Quoting PeterE
back test, forward test!

I am satisfied to first understand how the strategy works in principle on a few historical examples, and then start the forward test ............it works for me
Each trader has his own trading style of course.

Personally I like to see 1000 or 2000 profitable backtested trades before I even consider trading a system, no matter how wonderful the system seems at first glance.
  • #137
  • Jul 16, 2011 5:21pm Jul 16, 2011 5:21pm
yes, but only because you filter the pattern using "experience"

Quoting puppypippy
I find that the 123 pattern on it's own without any indicators wins more than it loses.
  • #138
  • Jul 16, 2011 5:29pm Jul 16, 2011 5:29pm
Quoting puppypippy
A guy I knew who traded the 123 professionally, did so by qualifying them with a break of a trend line and the formation of them around psych lines. Now I always found the breaking os a trend line to be too subjective but it seemed to work for him.

The psych lines however do seem to have some merit. If for nothing else than helping to eye ball a pattern. It does however seem, that 123 patterns will find resistance at these lines. Do your own backtesting and see with the attached indicator
On looking at that chart once I posted it and seeing it from a more compressed perspective. You can clearly see that the trendline here is very clear and was indeed broken. Also look at the time. That is always a good time for 123's from my experience. Around London open. And ofcourse you also have the 123 finding resistance at a major psych line.

That is a perfect Phil trade. Wonder if he is still out there somewhere? He is the guy that told me the most important thing in trading is a business plan. Thanks Phil Best advice I ever got!
Attached Image (click to enlarge)
Click to Enlarge Name: Jul. 17 08.22.gif Size: 28 KB
  • #139
  • Jul 16, 2011 5:32pm Jul 16, 2011 5:32pm
Quoting puppypippy
I am always weary of people who say that some method won't work in a backtest but will live
Indeed Puppypippy!

For example if after 2000 historical backtest trades a system shows a 5000 pip loss there is NO way on earth that this losing system will start winning live, people who maintain the contrary are either charlatans or they belong to the mad house. Or both.
  • #140
  • Jul 16, 2011 5:33pm Jul 16, 2011 5:33pm
Quoting Mr Breakout
Each trader has his own trading style of course.

Personally I like to see 1000 or 2000 profitable backtested trades before I even consider trading a system, no matter how wonderful the system seems at first glance.
Well with the 123 you could literally back test millions. It is not strategy in itself but can be used as one. Like Joe Ross states it is a law of charts. It is simply (for a long) sellers selling and then taking profits causing a pullback and then what should be a continuation of lowers lows in a downtrend fails when the last low is not taken out and instead the latest high is. You know something is up because basically a downtrend is the breaking of lows and an uptrend the breaking of highs.

It's this failure that results in a trend reversal.
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