How to use the 123 strategy effectively

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On the EU over night the trend was up so I was looking for a down move. Price formed a high at 1 but did not retrace by the required 61% so no 3 was formed So nothing on the EU for me today.


On the GU was looking for a similar move. It did come but was a big move involving over 100 pips which caused my a lot of concern due to the big stop required. However I did, slightly reluctantly enter, but decided tlater on to get out with only a slight gain. About four pips. However if I had followed the rules the closing price would have been just in profit. Massive though today and I was probably lucky not to come out with a loss.


Thanks for your comments capstone. Any improvements you think I could make are most welcome.


Best regards

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Good day today


EU Overnight market trending down, so was looking for an 123 up signal. It came and TP came at 4. Prior to this you can see it was almost reached. It was within about 2 pip. So I was on the one hand kicking myself that I had n't taken the profit but resigned myself to the fact that I needed higher price and rules where rules. I did however move my stop to break even. Well on this occasion patience paid off and my TP was reached with 59 pips profit.


GU a similar story, except that TP was quite shy of hitting the mark. So it was a little easier saying to myself that I should leave things as they are and just wait for price to reach the required amount. And again it paid off for a profit of 42 pips.

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Mixed day today


EU, good trade, overnight trend down so looking for an up signal and when it came, made 88 pips. Late in the day.


GU similar direction required, price however did not reach TP and at close of business closed for a 35 pip loss.


So overall not too bad with a +53 for the day.

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Long day today, big moves and no profit.


EU Overnight market down, so looking for an up 123 signal. Price did eventually retrace to 61 fib and at market close trade was only just in profit, 2 pips to be exact. But no loses


GU Overnight market down, so again looking for an up signal. Price did not come any where near point 2.

Read the whole thread. Paulus style is amazing. Started trading. +32 on e/u yesterday then -33 this am on news spike. I plan to post. I like the method.

Namloh, if you are trading this on the shorter 5M chart, it appears you are marking your 123 incorrectly. It appears like you are marking them for a longer time frame. I would suggest looking back over the beginning of the thread, focusing on Paulus's charts. Look at your EU chart from yesterday and what you marked, versus what I marked in my chart. By 7:05 you had a breach of the 123, and a Ross Hook to confirm it, taking it for 60 pips to the 161.8% or to the daily Pivot for around 70 pips.

Hi Capstone,

Many thanks for your feedback it's really appreciated.

Yes I am using the 5 minute charts. I don't quite get how you think I am using a longer time frame?. Please would you clarify.

I've got to say though that your chart & price action does look a bit different than mine.

Anyhow Here's is how I understand the system.

We are looking for a reversal of the trend from the over night market.

So on my EU chart, the low forms the number 1 point for me. I am then looking for a reversal to at least 61% fib. Which as I saw it, did not happen until point 3. At that point I place the order at point 2 and wait for the market to come back to point 2 and fill my order. I am then waiting for TP which I understood to be the same distance between point 1 & 2.

But please, if you feel I have got something wrong your guidance would be much appreciated.

Many thanks

It appears that the charts look different because you 2 is my take profit. You labeled the 2 very late. Zoom in your chart and look at where my 2 is. Our 1 is in the same spot.

Yeah I did take it late and was not too comfortable doing so.

But I didn't get a 61% retrace as mentioned until point 3.

Maybe it's my charts or am I drawing the fib's incorrectly?

Are you trading this method, if so how you doing with it?

Your feedback is most welcome.

Best regards

I do not trade it exclusively, but I do look for this pattern often. Usually, it pays out. Sometimes it does not, or it takes a very long time getting there. In the grand scheme of things, I am still a new trader, doing it for just over a year. It really helps to understand candlesticks and to look at what they are telling you in cooperation with this formation.

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Here's my action for today guys


EU, Overnight market down so looking for a up reversal. This happened early at point 1. Got a retrace at point 3 which was into the 61% fib so order placed at point 2. I was lucky today as TP was reached at the 1st point 4, just. Price retraced a little and then strongly broke through the price point again which gave me a large confidence boost in this system. Price then went on to triple the profit if I had trailed it. But that is for the future. 42 pip profit.

GU Looking for a similar up reversal. Got a low at one but price never retraced by 61% fib all day so no trades on this market today.

Happy trading

NIce hit on the EU. Just to clarify, if you look at Paulus's charts, his "61.8" is actually most people's "38.2". Under this correction, you would have had a hit on the GU. Maybe you want a deep retest to the actual 61.8. That is the nice thing about this, there is no hard rule, it is based only on price action and candlesticks. Nice job.

Thanks Capstone. I've reviewed this thread again and found the bit that you mentioned above regarding the "61.8" is actually most people's "38.2".

I will stick with my 61.8 for now but will definately keep an eye on this in the future. Many thanks for pointing this out and I will keep rereading the thread as I'm sure there is lots more things that I've missed. This is exactly why I have started to post my activity to get some feedback on my interpretation of the method.

Good trading to you.

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Two losers today!


EU Overnight market down, so looking of an up signal, which came, but did not have much strength and ended up taking out the SL for a 49 pip loss.


GU Unusually looking for an opposite signal to the EU, which did eventually come and moved to just 1 pip short of TP then reversed to take out the SL for a 31 pip loss.


So not a good day today, was it just one of those days or did I miss something?

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No signals for me today.
Both markets trending down, so looking for up signals. None came so no trades.

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Nothing again for me today.
The was a very drawn out signal on the GU which I did not take but if I had it would have ended up slightly in profit.


Very quiet on the 123 front, anyone else trading the system? How's it going for you?

I am trading the method. E/U choppy so currently looking at G/U and USD/CHF.

Hi All. This thread gave me a good foundation for trading 123's and for that I salute the threads originator. It took me a while to begin seeing 123's in a slightly different light. I now am not averse to using them with less stringent rules. For instance, I now trade the "Flag Trend" (http://www.forexfactory.com/showthre...45#post4978645) method very consistently. Although this link shows a 5min loser, which I rarely experience, it also shows the 123 set up I used as confirmation. The chances of this set up failing, while using the correct application of the Flag method, are very slim.

However take a look at what happened a few candles later, and not once but twice. Not the easiest thing to spot but a 2B reversal. http://www.trading-naked.com/2b-reversal.htm

Allowing 2 separate opportunities to get in good scalps.

Just some food for thought. btw, if any of you are outside the US and can trade oil, 123's work quite well. I didn't see much use on silver or gold though.
Darryl

Namloh, it appears your 5M charts are being viewed from a "30,000 foot" level. Meaning, you seem to have them zoomed out very far, making it hard to see all of the small swings that make up a 5M chart. I might suggest zomming in a bit to better see your 123 formations.

it works, only PA, simple setup