123 pattern trading system
Get help. Forex Racer. By admin. On with the report. This is what I am going to explain to you: What exactly is a pattern? Which charts and time frames do they exist? Previous article Closing Price Reversal Indicator.
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The chart pattern |
As you can see, you can ignore the standard take profit placement method with a not so good risk-reward ratio and opt for an alternative method, increasing your ROI. More reliable signals within a trend retracement occur when a Point 2 breakout indicates the end of retracement and continuation of the main trend. Furthermore, a pattern can form at the end of a trend as an indication of an upcoming change.
For bigger profits, be sure to only trade a pattern that followed a strong trend. There is a continuous downtrend, with each new low and high lower than the previous lows and highs. Then the price breaks the downtrend line in Point 2 and forms a higher high. This is an indication of a possible trend reversal.
Point 1 is the last low a possible bottom of the trend. Entering the market at this point is too risky. We need to wait for a complete pattern and Point 2 breakout. Continuing to move beyond Point 2, the price forms a new low which is higher than the previous one. This means that the price is too weak to break the last low and form a lower low.
This place is our Point 3. It completes the pattern.
How to Use 1-2-3 Reversal Pattern in Trading?
We need to wait for a Point 2 breakout. The price continues to go up and breaks Point 2. If we placed a buy stop in Point 2, it would be activated and our trade would be closed by taking profit if we used the standard take profit placement method, i. Here are some useful guidelines to help you correctly identify, interpret, and trade a pattern:.
Many traders use a pattern in combination with different indicators. If a pattern indicates an uptrend reversal, Stochastic must be in the overbought area. And vice versa. If a pattern signals a downtrend reversal, Stochastic must be in the oversold area. This approach provides better signals and reduces potential losses. If, while Point 1 is emerging, Stochastic moves somewhere in the middle, this signal is not strong enough.
We use Stochastic as a confirmation tool. Point 1 has formed and Stochastic is in the overbought area, which is a good sign. Am not an expert here, but from the little experience, 1 2 3 pattern can used at any time frame.. This is one of the best continuation patterns cidering ons this adheres to the Elliot Wave Principle and the Fibonacci Retracement and Fibonacci Extension. Save my name, email, and website in this browser for the next time I comment. Necessary cookies are absolutely essential for the website to function properly.
How to Trade 1-2-3 Patterns
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1-2-3 Pattern Day Trader
Table of Contents. Triple Top Pattern. Doji Candlestick Pattern Recognition. Please note that trading, especially margin trading contains high risks of losing a deposit.
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