During the course of any trend, either up or down, the market will form little peaks and valleys, see the chart below:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
1. This works best as a reversal pattern so identify a previous downtrend.
2. Wait for the MACD to signal a buy and for the 1-2-3 set up to
be in place.
3. As the market pulls back to point 3, the MACD should remain in
buy mode or just slightly dip into sell.
4. Place a buy entry order 1 pip above point 2
5. Place a stop loss order 1 pip below point 3
6. Measure the distance between point 2 and 3 and project that
forward for your exit.
7. Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
1. This works best as a reversal pattern so identify a previous downtrend.
2. Wait for the MACD to signal a buy and for the 1-2-3 set up to
be in place.
3. As the market pulls back to point 3, the MACD should remain in
buy mode or just slightly dip into sell.
4. Place a buy entry order 1 pip above point 2
5. Place a stop loss order 1 pip below point 3
6. Measure the distance between point 2 and 3 and project that
forward for your exit.
7. Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
During the course of any trend, either up or down, the market will form little peaks and valleys, see the chart below:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
1. This works best as a reversal pattern so identify a previous downtrend.
2. Wait for the MACD to signal a buy and for the 1-2-3 set up to
be in place.
3. As the market pulls back to point 3, the MACD should remain in
buy mode or just slightly dip into sell.
4. Place a buy entry order 1 pip above point 2
5. Place a stop loss order 1 pip below point 3
6. Measure the distance between point 2 and 3 and project that
forward for your exit.
7. Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
1. This works best as a reversal pattern so identify a previous downtrend.
2. Wait for the MACD to signal a buy and for the 1-2-3 set up to
be in place.
3. As the market pulls back to point 3, the MACD should remain in
buy mode or just slightly dip into sell.
4. Place a buy entry order 1 pip above point 2
5. Place a stop loss order 1 pip below point 3
6. Measure the distance between point 2 and 3 and project that
forward for your exit.
7. Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
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1-2-3 forex (By Mark Mc Rae)
Forex Trading Systems:
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Risk Warning
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ForexOnSet | 07 - 08
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