The 123 Trading Strategy Explained | 123 pattern | The Diary of a Trader


Hello and welcome back to another strategy
video in front of you I have the Euro/Kiwi dollar pair on the hourly time frame and this
is the one two three trading system. Very simple system doesn’t get much easier
or simple than this. It’s essentially a zigzag pattern. So what you’re trying to do is stay with the
momentum of the market and take advantage of continued strength or weakness because
it does work in both directions. So as I draw this out I will label each one
of these bits here. One two and 3 One is the initial move and
in this case it’s from one fifty five to 157. Two is the retracement and 3 is a confirmation
of a higher high. That’s all it takes. Now there are a lot of different variations
of this. There are a lot of different ways you can
tweak this a couple of different ways that you might choose to approach this is to at
least aim for the with or the hive. I should say of the move here. So in this case it’s 200 pips. So when you enter here you need to get 200
pips so in this case. Quick dirty math says 159 and we did in fact
reach that area here so you would expect the market to continue going higher. There is also the possibility of using it
as an opportunity to pyramid so you can do something like this and I’ll change color
here. The one two three get you involved but on
the next move the continuation of Amoo the three on this the entry the same wave that
formed the theory becomes the first wave. This becomes the second wave almost like Elliot
Wave if you are familiar with that and then that becomes of the three. So what people will do often with this type
of system is say put in a full position in the first then on the second add something
like a quarter position and then as this becomes 1 2 and 3 add another quarter position. So you’re already up to one and a half at
this point. Obviously moving your Stop-Loss is up there
are a multitude of ways to approach this but obviously it is up to the traders discretion. If you were to be negative of this pair you
could make this 1 2 and then 3. In short there and you would have hit your
profit target about that. Probably not a whole lot more. So it does work in both directions. It does tend to work with the longer term
trend a little bit better just because of the added momentum.

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