How to use the 123 Strategy effectively. Posts of “Paulus” from the thread:- How to use the 123 Strategy effectively. forexfactory.com
ou have to !ee" this ty"e of system clea# a#d sim"le the 123 "atter# is $ased o# the "sychological reactio#s of traders to other traders Sim"le ex"la#atio#.. %he 123 lo#g &e have a low at 1 we the# have $uyi#g to a high at 2 a#d the# a selli#g off dow# to 3 BUT the 3 ma!es a higher low tha# the 1..$uyers ste""ed i# a#d $ought $efore a lower low was created a#d co#ti#ued the dow# tre#d ..this is your 123 low formatio#. %he target level of your e#try o# this ty"e of tradi#g has to $e 2 to 3 times the si'e of your sto" %he way ( do is sim"le a#d co#servative ta!e the low at 3 at the e#try "oi#t this is your ris! o# the trade...)ust tra#s"ose the level i# for#t of your e#try to get 1**+ 2**+ 3**+ etc etc you ca# go o# as lo#g as you li!e u#til your sto""ed ,ovi#g of S &he# you hit 1**+ move S to e#try..whe# you hit 2**+ move S to 1**+ level etc etc here is exam"le followed $y actual chart exam"le the last sig#als is still live a#d sto" would of $ee# moved to $rea! eve# 2 hours ago.. sig#als si#ce $eg se"t o# this 1 swa" o# a 1 hour chart for a gai# of arou#d 1st sig#al 1/* "i"s 00 :1 2#d sig#al 23/ "i"s reversed i#to short 00 3./:1 3rd sig#al lost 2 "i"s sig#al still live 1**+ hit so S #ow at $rea! eve#
( have 2 a#d 3 i# "lace a $rea! of 2 will see the short o"e#
u"dated chart fail o# the 1/mi# 0S4 for 5 2"i"s6 $ut i# agai# a#d loo!i#g loo! i#g good
u"date o# e#tries.. 1 hour #ew cou#t 1 i# "lace 7 1 hour #ew cou#t 1 i# "lace
%hese 2 cou#ts were the o#ly 2 formatio# o# 8riday o# this swa" ( have i#c the / mi# a#d the 1/ mi# which $oth co#firm %he $ottom charts shows how 'ig 'ag ca# hel" with the cou#ts
Hi Paulus: 7reat to see you co#tri$uti#g to this thread. 9a# ( as! are you actively tradi#g this strategy the way you outli#e here a#d if you are6 have you $ee# successful. (ve tal!ed with 7olferguy a$out how he trades6 hes $ee# successful6 $ut has variatio#s that ( guess (m )ust #ot smart e#ough to follow. &as ho"i#g someo#e was successful )ust usi#g this system i# its $asic form. %ha#!s for your time. es ( trade this for a few good reaso#s 1. ;ery good ris! reward o# wi##i#g trades 2. <#ce "oi#t 3 has $ee# ide#tified a lmt $uy or sell ca# $e "laced a#d ( ca# wal! away or at least relax a#d do somethi#g else 3. %he idea $ehi#d it is "ure su""ly a#d dema#d .. ( !#ow why its ha""e#i#g #ot that a stoch is )ust <= or
if you follow this "rocedure it gives you a# excelle#t cha#ce of s"otti#g 123 reversals o# a#y time frame..the ris! o# the short was from e#try at the $ro!e# level of 2 to the high of 3 arou#d 2 "i"s ...results gave us 2:1 o# this trade
#ever e#ter o# a ga" u" or dow# o# a mo#day..ie we have our 123 a#d loo!i#g for level 2 to $e $ro!e# for a lo#g..we get a ga" u" o"e# o# ,o#day...do #ot trade this...its u#relia$le %o gauge the re?uired "ull $ac! or rally to create the 2 "oi#t use @1.A fi$ ( will show this o# a#other chart
%he chart you see here is accurate a#d cou#ts accurate..yellow $oxes are exit "oi#ts the 1st lo#g was reversed i#to short 123 $efore a#y S was hit
&e #eed a stro#gish "ull $ac! or rally ( use @1.A+ to gauge this
B1C 4o you fi#d 1-2-3 "atter# o# all timeframes e?ually li!ely to result i# wi##i#g tradesD
B/C astly6 do you care a$out hours of the sessio# whe# the 1-2-3 setu" occursD ets say o# a 1/-,i# chart6 a setu" occurs after S close whe# tradi#g activity has slowed sig#ifica#tly6 do you $elieve this setu" is )ust as good as o#e that occurs duri#g o#do# sessio#D Go..a#y set u" that ha""e#s withi# o"e# a#d S close is deemed more relia$le "urely for the fact there is more volatility ..i# low "eriods of volatility the setu" are more curre#t
here is a good exam"le of the #eed to wait for the retraceme#t to @1.A+ a#d at least 2 u" ca#dles <# the scree# shot of today o# IJ you could "lace your 2 at > i#itially with your 3 at = %his would of resulted i# a losi#g trade.. reaso# why #ot to ta!e this sig#al eve# though @1.A was hit 1. <#ly 1 P ca#dle from > to = we #eed a mi# of 2 4o)is are o! result we wait.. Price ma!es lower low we move our 2 to this "ositio# a#d move dow# our 8i$ li#e to 2 ...we get a ga" u" this mor#i#g thats o! as it was#t the trigger i#..it is )ust "art of the formatio#. &e get a move u" to our 8i$ level a#d we have more tha# 1 u" ca#dle si#ce 2 was formed #ow as we get the 1st dow# $ar we ca# mar! it as 3 a#d set u" a lmt sell (t triggered6 our sl is set at 1"i" a$ove high of 3.
%his trade has )ust triggered $it late i# the day as S closed a#d S closi#g i# 3 hours.. &e have had a# u" move..al$eit #ot so much of a tre#d tha# a sudde# ex"losive move..however we wa#t cou#ter tre#d trades so we loo! for the short &e mar! 1 a#d 2 easily a#d use our fi$ tool to get the @1.A retraceme#t li#e. &e hit it exactly a#d so the high at 3 ca# $e mar!ed weh# we get a dow# $ar that has a lower close..%hat ha""e#d a#d so we setu" a lmt sell which has $ee# triggered &e #ow wor! out our %P level with the same fi$ tool goi#g from 3 to 2
(t loo!s li!e Paulus must have made a mista!e whe# mar!i#g u" that trade. He drew the fi$ from 2 to 1 i#stead of 1 to 2. %he retraceme#t mar!ed there is i# fact 3A.2 #ot @1.A. correct ( set it u" wro#g $ut ho"efully you get the gist
Hi6 )ust 2 ?uic! ?uestio#s. B1C &e wa#t to see a mi#imum retraceme#t of @1.A+. 4o you have i# mi#d a Emaximum retraceme#tED 8or exam"le6 if retraceme#t is A/+ or eve# K/+ Bma!i#g the "atter# loo!s li!e a dou$le to"Ldou$le $ottom M4%L4=NC6 do you give u" o# this setu" a#d wait for the #ext 1-2-3 "atter#D
havi#g good success with this i# fact more so tha# a#y other system i have used or created i# the "ast.. (ts )ust "rice actio# $ut you #eed some rules mi#e are sim"le 1. ( start loo!i#g for 123 at am u! time o#...#ot $efore 2. if we are goi#g u" i# the >sia# sessio# ( loo! for a short a#d visa versa 3. ( always ta!e tre#d reversals #ot co#ti#uatio# of tre#ds . (f ( ta!e a short 1st thi#g the# the rest of my trades go lo#g short lo#g short etc /. ( must have more tha# 1 ca#dle i# $etwee# 1 a#d 2 a#d 2 a#d 3 @. %he "ull $ac! or rally from 2 to 3 must reach the @1.A+ of the 1 to 2 move . ,y sto" loss #ow goes 1"i" $elow or a$ove 1 A. ,y %P is always the dista#ce from 1 to 2 ,y trades today so far 1KO3O/ (m #ow cou#ti#g 1 agai# a#d loo!i#g for lo#gs
,o#day
4aily 1 i# "lace
1hour 1 a#d 2 i# "lace
3 sig#als today O2K-3O3 O32 curre#tly loo!i#g for a short #um$er 1 i# "lace
ou Q9>GQ ta!e 123 "atter#s i# the directio# of the tre#d6 $ut there are some #ice )uicy 123 "atter#s that are tre#d reversals. ( o#ly ta!e reversals #ot tre#d co#ti#uatio# 123 set u"s so (m ho"i#g to cash i# o# the i#itial move i# a #ew tre#d. >lso $ecause ( ta!e o#ly reversals my S at 1 rather tha# 2 res"ects the last swi#g high i# the old tre#d directio# so from a tech#ical "oi#t of view is very stro#g >lso ( do thi#! 123 reversals are the safer stro#ger "atter#..agreed if a curre#cy moves u" all day you ca# see loads of 123s i# the directio# of the tre#d..$ut ( do "refer the reversals as it gives 2-3 good sig#als each day.
havi#g good success with this system ( must admit here is my latest daily sig#al u" * "i"s %he# we have the 1hour which im still loo!i#g to lo#g $ut #o valid 123 cou#t yet..all ( !ee" doi#g is movi#g the 1 cou#t dow# >#d the /mi# with 1 sig#al today so far
we #ow have a 1-2 i# "lace o# the /mi#... we #eed the low to hit the @1.A+ li#e with more tha# 1 ca#dle i# $etwee# the 2 a#d 3 cou#t for it to $e valid ..we the# ta!e the $rea! of the 2 level with a lo#g66%P is set at the 2** level which is )ust the dista#ce from 1 to 2 "ro)ected forward
we #ow have 3 there is more tha# 1 ca#dle $etwee# 2 a#d 3 i# this case 3 ca#dles a#d its hit the @1.A+ level %he cou#t will $e valid u#less the low goes $elow the low at 1 i# which case we start the cou#t agai# %ri""er "oi#t is 1 "i" a$ove the 2 level
(ts a "owerful "atter# $ut you #eed rules to trade it effectively ( got the 2/ "i"s also..#ow o# cou#t 1 for a short
1 a#d 2 i# "lace for the short )ust had the "ull $ac! to @1.A+ a#d the ga" $etwee# 2 a#d "ote#tial 3 is more tha# 1 ca#dle &e go short 1 "i" $elow 2 as lo#g as the high of 1 is #ot $ro!e# ... (f it does we start the cou#t to go short agai#
o! 3 was fixed i# "lace as the high did #ot go higher tha# the high at 1 Gow short from $rea! of low at 2 %P has $ee# la$led a#d S at 1
3rd %P hit so #ot a $ad wal! a#d tal! through
7reat that you have the filter usi#g 8i$. ( wo#der there would have $ee# 2 other valid trades B( highlight i# redC o# the chart you "osted. ,ay ( as! why you did#t ta!e themD
( always trade cou#ter tre#d with 123 #ot with the tre#d..this i fi#d cuts dow# o# the false sig#al so my tradi#g will always $e lo#g short lo#g short etc or short lo#g short lo#g etc (f ( get the trade right the# (m i# at the strt of a "ote#tial #ew tre#d..do#t forget if we are tre#di#g u" the# we #eed a high B 1C a low B2C a#d the# a lower high B 3C the $uyers ca##ot force the #ew high at 3 so it stalls...if the selli#g "ower is stro#g it $rea!s 2 a#d all the lo#gs #o wa#t short a#d thats where we go i#. So the 1st a#swer is ( #ever ta!e 2 lo#gs $ac! to $ac!..also if you loo! at the chart from the hi of 2 to the lo of 3 there is o#ly 1 ca#dle i# the case of the 1st sig#al #o ca#dle.. ( must have at least 2 ca#dles $etwee# cou#ts 1 to 2 a#d 2 to 3 agai# it cuts out loads of false sig#als. these are my rules a#d they have $ee# "osted earlier ( will try a#d fi#d them ( start loo!i#g for 123 at am u! time o#...#ot $efore if we are goi#g u" i# the >sia# sessio# ( loo! for a short a#d visa versa ( always ta!e tre#d reversals #ot co#ti#uatio# of tre#ds (f ( ta!e a short 1st thi#g the# the rest of my trades go lo#g short lo#g short etc ( must have more tha# 1 ca#dle i# $etwee# 1 a#d 2 a#d 2 a#d 3 %he "ull $ac! or rally from 2 to 3 must reach the @1.A+ of the 1 to 2 move ,y sto" loss #ow goes 1"i" $elow or a$ove 1 ,y %P is always the dista#ce from 1 to 2
1 hour triggered from our cou#t yest 1"i" a$ove the 2 cou#t <# the 1hour we trade 2 hour a"art from our slee" time %P is the li#e at the yellow $ox
daily still loo!s good..it #eeds to rally "erha"s today ready for "u#ch dow# agai# "erha"s
Had a loser o# the /mi# today 2 "i"s...do#t forget mo#ey ma#ageme#t do#t )ust trade 1 co#tract or 2 co#tracts $ecause you feel luc!y today wor! it out "ro"erly $ut we have had a 1hour wi# for / "i"s
..if6 after a losi#g trade6 do you still alter#ate the directio# $ias6 or are you #ow loo!i#g for a#other /mi# 123 shortD
yes loo!i#g for a /mi# short as my S was hit which mea#s we have had a higher high tha# my origi#al #um$er 1 cou#t..which mea#s the tre#d co#ti#ued u"...so we loo! for the short agai#
yes a#other short here ...#ot that ( go o# such thi#gs $ut a $etter loo!i#g 123 sha"e...more reaso#a$le amou#t of "i"s $etwee# high of 1 a#d 3
Gice wd ............. we have our t" #ow with 3@ "i"s which was #ice
1 i# "lace o# 1 hour a#d /mi#
usi#g the same "ri#ci"le here is a# adva#ced way of e#try..adva#ced $ei#g a#other word for ris!ier .. $ut may$e more "roductio# i# "i"s &e wait u#til our 3 cou#t has go#e i#..this is determi#ed $y 1. =ei#g more tha# 1 ca#dle from the 2 cou#t 1. %he low of the "ros"ective 3 cou#t is higher tha# the low of the 1 cou#t >ll a$ove is #ormal with the 123 set u" So o#ce our 3 cou#t has go#e i# we draw a li#e alo#g the highs of the ca#dles as show# i# the "iccy $elow.&he# we get a ca#dle that closes a$ove the li#e ..#ot $rea!s it $ut closes a$ove it we go lo#g (# the case of the 1st exam"le we get / extra "i"s as our %P will $e the same .(# the 2#d exam"le we get extra "i"s <# the 1hour trade today a# extra / "i"s
)ust #eed to clear this u" i# my head. &e had the successful short6 so were the# loo!i#g for the lo#g...the fi$ you "ulled seems to $e for shortsD &e draw from 1 to 2...2 is the level we #eed to $rea! to go lo#g if at 1 is *+ a#d 2 is 1**+ %he# @1.A+ should $e i# the u""er half as "rice has to "ull $ac! from 2 dow# to the @1.A+ level
&he# i 1st started this ( set my fi$ "ro)ectio#s to 1** 2** 3** ** etc etc 8or a short whe# "rice hit 2** $ri#g sto" to 1** whe# "rice hits 3** $ri#g "rice to 2** etc etc %his is letti#g your "rofits ru#..which may $e fi#e o# daily trades $ut o# /mi# we still get allot of #oise a#d whi" saw.. ( seem to ma!e more mo#ey closi#g the whole lot out at my static %P rather tha# closi#g half etc etc >lso arou#d holiday times..summer 9hristmas etc volatility is dow# so lo#g tre#ds seem to ha""e# less. %oday 1st trade is a classic exam"le (m out with 3A "i"s if you e#eter o# the ris!ier adva#ced e#try you would of got "i"s
=ut usi#g the fi$s of 2** 3** ** etc with the "rice at 3** as "er the chart your slidi#g S would $e at 2** if the "rice reaches ** the# move your sl to 3** etc etc the o#ly "ro$lem with this is that if "rice reaches 2** B where ( closeC the "erso# usi#g slidi#g S will go to $rea! eve# at 1** level B the 2 cou#t where we e#terC Gow...if "rice retraces they will $e ta!e# out at $rea! eve# where as ( am out with a "rofit
2 #ice trades this mor#i#g for O13 a#d O3A 1st "oi#t if im i# a trade a#d #ews is comi#g out ( stay i# the trade ( #ever close out "rematurely.
>fter the 2#d wi# ( was loo!i#g for a short which is my #ormal se?ue#ce %he #um$er 1 i# red were "ote#tial 1 cou#ts that were the# removed due to a higher high $ei#g made &e curre#tly have a com"leted cou#t with a short ho"efully $ei#g triggered at 1.33@2 (f you too! the ris!y e#try you would $e live at > at 1.33@@
<#e ?uestio# ( have is the rule of o#ly ta!i#g o#g after short a#d short after lo#g trades.....( do#t ?uite get the reaso#i#g $ehi#d that. %his )ust hel"s me stay away from the sig#als ta!e# with the tre#d. ( o#ly wa#t 1 sig#al "er tre#d a#d thats at the start...$ecause the odds are i# my favour with a 123 set u" $ecause of the higher low or lower high de"e#di#g o# if its a short or lo#g. o#ce a tre#d is esta$lished #o o#e $ut #o o#e !#ows whe# it will e#d or fail or ru# out of steam...#o good "ic!i#g a tre#dy day i# hi#d sight a#d sayi#g the tre#d is your frie#d $ecause o# the / mi# time frame (ve fou#d its $etter to $e selective
(# a# ideal world (d love to use a slidi#g sto" loss our 00 could go as far as R1 o# a#y o#e trade givi#g us great retur#s for a /1.+ hit rate. =ut heres the ru$..we ca# do that $ut we will have days of 'ero "i"s..8riday for exam"le gave me O13O3A.. si#g my slidi#g sto" as outli#ed earlier i# the thread we get *O* #ot a loss agreed $ut #o wi# doi#g this for last wee! gave us Gormal rules O23O21.. O21O2..O3/O2/O2..-2..O3A..O13O3A 23A Slidi#g sto" O1@AO2 ..O*O*O3A..-2 ..O3A..O*O* 2 u#dersta#da$ly the reaso# we ca##ot catch the tre#d sis #oise /mi# time frame although gives us 23 sig#als a day also has u" dow# moveme#t which ta!es out sto" whe# the 1st t" is hit a#d we #ormally close i#stead of $ri#gi#g your S to $rea! eve# $ri#g is to O/*+ of $rea! eve# as the "rice ofte# comes $ac! to the 2 or $rea! out level for a re test a#d there doi#g ta!es out our $rea! eve# sto" 8or last wee! we get O1@AO2..-1-1O3A..-2-1A..O3A..-O1** O2K/ losers i#crease $ut gai# i# "i"s i# i#creased with ,, "erha"s this is the way forward.. "erha"s the S should $e at 3 #ot 1 as ( origi#ally traded .. ( will have to loo! over your scree# "ri#ts a#d wor! out the figures..its all dow# to #oise o# the /mi# time frame there is a# a#swer to this $ut for the life of me ( hav#t fou#d it yet
im #ow loo!i#g at a# exte#sio# of [email protected] as a fi$ %P from e#try %his should give 3R1 ris! reward usi#g cou#t 3 as S a#d 1.@: 1 00 usi#g cou#t 1 as S
my 1st /mi# trade..tryi#g #ew tgt of [email protected] of the move from 1 - 2 for $etter 00 1hour 9 a#d 1hour also o"e#
#ow we have it
(ve had 2 #ice trades this mor#i#g o# a#d 7 O3 a#d O31 ( #ow have 1 i# "lace for the reversal
7 hit its %P so closed at 2 "i"s a#d a cou#t of 1 i# "lace for the short still o"e# atm
o! were there
out with 2A o# gu a#d i# a lo#g with eu
So6 you see your H or H6 you o"e# the trade a#d set your targets. However6 u#!#ow# to you it is a ra#gi#g day - how do you !#ow whe# to exitD 4o you wait for your sl to $e hit or do you use a#other sig#alD <#ce im i# a trade ( #ever close out early or carry out a#alysis o# my chart..my tradi#g has to $e $lac! a#d white a#d rules $ased ( have o#ly 2 o"tio#s o#ce im i# a trade ( lose whe# my fixed S is hit ( wi# whe# my fixed %P is hit <# a short my sl is 1 "i" a$ove 1 my %P is the dista#ce from this to 2..."ro)ected dow# givi#g 00 of 1:1 ;isa versa for lo#gs ( have #o time limit ( start my #ormal time if ( go lo#g 1mi# after a#d the day ra#ges ( will stay i# that trade all day as lo#g as my %P a#d S is #ot hit ( #ever reverse...too su$)ective. &he# S closes if (m i# "rofit i ofte# close
( #ow have a 2 i# "lace o# $oth ....)ust..$ut for a 3 ( #eed a "ull $ac! to the @1.A level a#d more tha# 1 ca#dle i# $etwee# 2 a#d 3 cou#t
&hat a$out this 123D B#o good $ecause o#ly o#e $ar $etwee# 2 a#d 3DC
es thats right..you ca# ta!e them $ut if you do you e#d u" ta!i#g loads of trades.. we #eed 3 defi#ite ca#dles the 1 2 a#d 3 cou#t if we )ust add 1 ca#dle i# $etwee# each the# that gives us / ca#dles for a formatio# that use 3 way to tight.. ( #eed at least 2 ca#dles i# $etwee# each cou#t a#d the rally or "ull $ac! to the @1.A level
( closed the 7 lo#g that triggered /mi#s $efore m!t closed for O1
Ho"efuly we have the 123 cou#t all that is ha""e#i#g here is the followi#g 1. %he "rice is u" tre#di#g which mea#s more $uyers tha# sellers 2. %he "rice "ulls $ac! as "eo"le ta!e "rofits a#d gives us a 1 at the to" 3.
%hese eve#ts are show# #icely i# the curre#t 123 short o# the daily ..%P #ot hit yet 3 thi#gs to loo! at o# this chart 1. (# the u"tre#d all the yellow $oxes are @1.A+ levels 2. %he "rice at F tested the old low at 2 a classic su""ort tur#i#g i#to resista#ce after all its a stro#g level this "oi#t e#ded the u" tre#d 3. . %he $lue li#e at F is arou#d the @*+ "ull $ac! level very close to the @1.A
7 OAO2K 123 cou#t i# for short $ut #ot triggered yet O1/O3*O22 1 a#d 2 cou#t i# for short
( am #ow lo#g $oth a#d 7
my daily trade o# still loo!s o! .. &e#t to OA* "i"s i# / days "ulled $ac! tested old $rea! of 2 level a#d #ow siti#g at arou#d 1A/ "i"s
