123PatternsV6 revisited

My preference is always conservative entry inside the zone. Aggressive does work sometimes even with a tight SL, scalpers probably do well with it grabbing some quick pips on the break of 2.

The sequence that interests me is 1 2 3 break, retrace candles, then TTE. If the TTE occurs in the zone and above 50% fibo that's perfect.

Yes my failed trade was similar setup although earlier. I was feeling too much pressure to get into a trade. If the bulls were in control I don't think we would see all that price action below 50 fib.

The other point I garnered from Joe Ross is successful 123 patterns follow a strong directional move, they do not follow after sideways consolidation.

Welcome PartyPips, good question. Just before I answer that take another look at your 123 numbering. 2 is always in the direction you expect the price to move. So for a bearish pattern 2 is the always the lowest number. For a bullish pattern 2 is always the highest number.

OK, yes there was a candle that closed below the bearish point 2 (that you label 1). The problem was the red line coming from that point did not stay intact. This is a side effect of using ZigZag to find the price points. I accepted this limitation during last year's development but it did cause concern for those trying to catch absolutely every possible break.



Here is an example of a distorted bearish pattern where the red line coming from point 2 did remain intact. It remained intact long enough for a candle to clearly close below it. That is what 123Patterns is looking for to print the red arrow.



Traders please note this is an advanced setup that I have not yet described anywhere in this thread.

Robdee

Wooohhh what I was thinking when i did label the numbers sorry about that.

Thanks Robdee for your coments. Any way, this indicator works very well.

I will be talking, about how do I trade this patterns.

thank you robdee, that was exactly the answer i was looking for. your thinking is close to mine and that makes me happy.. now for me to find something more to learn. right

Hello all,

I just want to comment how do I trade using ZigZag:

About Equity Management & Risk to Reward Ratio:

I'm sure that this is one of the most important when trading.

Usually I only risk 2% of my account and go at least for the double of the risk. So, why I don't care and why I do care about stop loss in pips: I don't care because I will be risking 2%, it doesn't mater if the stop loss is 10 pips or 40 pips from my entry I will increase or decrease the lots to trade, and it will represent 2%. I do care, because if my stop loss it's 10 pips I will go for 20 pips (my minimum target will be the double) but if my stop loss it's 40 pips at least I will go for 80 pips, and for my it's much easier to take 20 than 80 and in both cases I will earn 4%.

Why at least the double, because in the worst case if I'm only right 34% of the time I will be positive .

About Entry, Stop Loss and Exit:

Entry: I do trade Ideal & Distorted patterns but I ALWAYS wait for a retracement using A- level off broken support or resistance (label #2) (the arrow at the indicator it's a good guide) or B- Fibo levels with the combiantion off candlesticks formation (the best ones: bullish or bearish engulfing and evening or morning star, and I also look for tweezer top or bottom and pin bars, nothing else)

Important: if I don't have a new 123 pattern I will reentry in the same direction

Stop Loss: 3 pips the high or low of the signal candle or the previous candle.

Exit: Fibo targets 1.618 for retracements to 61.8% and 1.27 if the retracement was around 78.6% or just double the stop loss as target (i do this usually for the first and the second trade of the day "if" i'm planing not to work all day, but if the 2 firts trades are looser, them I keep trading using fibos target).
NOTE: once I set my target I don't follow the market moving the stop loss. It's like set and forget

Drawdown: 4 loosing trades in a row could happen in a single day, but you will recover it with fibo targets very fast, and yes, i had 5 and 6 loosing trades in a single day but they are not common

Aditional Indicators: don't need it, 123 pattern it's all

I will be posting some trades and you will see how it works.

IMPORTANT NOTE: this is my way of trading from some years ago, but great that Robdee has post the indicator to help new people.

Any question, just let me know.

Happy thanksgiving day

Hi friends,
Anyone pls care to explain how this zigzag indicator works?
What's are the 3 settings for?
Get confused when should it start to draw the zz line when prices turning around? based on the extdeviation?

googled but not clear.

Thanking you in advance.

Welcome lefteye, I agree it is a bit of a mystery how zigzag actually works.
Here is a link to a basic ZigZag article.

Thanks Robdee, ....still confused. Nonetheless, thanks!

hey i do not know if this will help but.. the zigzag draw lines at and in between extremes of price action. the defining factor in when or why a line is drawn is when price is greater then stated percent value.

the depth is referred to as the minimal amount of bars that has to be drawn before the indicator is looking to draw a new line, thus creating lines in between a specified interval of bars.

the third value that the zigzag uses has to do with the amount in pips that differs from the last point of the line. by definition, if this amount is exceeded a new line is drawn.


i might have got something wrong though.. but if you or anyone else for that matter has any questions regarding this please do not hesitate to pm me. thank you

thx, getting bit of it...

Have read through all your posts and really like this system.Have not traded it yet but have spent a bit of time going through sam seiden supply demand clips economics 101 he calls it and your strategy of a pull back to the no2 break makes a lot of sense in the supply demand concept. I am really looking forward to your ideas and will contribute where I can

G'day sako, welcome to the thread. Your input is welcome. Just this week I started summer school at Massey University studying economics. Learning to think like an economist is useful and relevant to trading.

Anyone want a fun, easy to read explanation of economics ?

The Undercover Economist by Tim Harford

"A work of true originality, entertaining, thought-provoking, and alarming in roughly equal measures." - The Sunday Business Post

The day after Thanksgiving called Black Friday in North America. Markets there very quiet as expected.

 

1. London opened on growing volume and bearish bias.
2. Bulls did little to defend 1.33
3. Interesting drop in volume 12:15-1:15 GMT possibly lunch?
4. Second target reached but not even 100 pips in the range today.

Big view oversold with divergence approaching 4 Oct support 1.315.
Next week should be a ripper.

Robdee

here is a simple way and confirming way for trading 123's

An odd enhancer is picking the setups that give the best probability of success
Note the 2 setups on EUR .

The first setup had a weak move away from the level and price did not move far from the breakout. Result was 1-2 the small 14pip move
Granted a round number 1.3300 was in the way of the trade

The second setup had a strong move from the level and price moved a fair distance before retracing back.
A strong move away from the setup arrow implies a strong supply area (more sellers than buyers) which if price moves back too ,there should be more sell orders there. Result was the 1-2 approx 75 pip move down.

Didnt take this trade was asleep nz time just for educational purposes

i like this idea so much. i did something similar two days ago. after seeing the 123 go short and i did have that one to.. i put another order in to sell at the old point 2, stop was 3 pips + spread. wouldn't you know it my order got filled, target at 78 something. who would not risk 1 to get 10 right? :-) another nice way to use 123s or the wording how 123s are useful.

and to take advantage of the PA re-visiting the S/R

You kinda wish all days were like today

M5