iCharts Discussions

[sherbaaz]

Hi All,

Sharing a very simple set up known as 1-2-3. Once comprehend, it is very easy to apply and results are profitable. Works well at tops and bottoms and also during the trend.

No indicators are used but to support one can use STS or MACD, MA which align well with the set up. You can use you any indicator of your choice if you get the logic right. Floor pivots goes well with the set up

It's one of the oldest ways of trading one can call it peak and tough method also.

Lets roll the dice.

Chart Type: Bar Chart
Indicator: None
Time Frame: Works well on both intra day and EOD, weekly, monthly. Higher the time frame higher the probability of successful trade.


What is 1-2-3 set up ?

A typical 1-2-3 high is formed at the end of an up trending market. Price making final high and then goes down wards which will create a point 2 and from there an upward correction begins and bar making point 3 remember that the correction must not go above the high of bar making point 1, it looks like a M pattern.

A typical 1-2-3 low is formed at the end of a down trending. Price making final low and then goes up creating point 2 and from there a down ward correction begins whose low is not below the low of point 1 bar thus completing 1-2-3 formation. It looks like W pattern.

In between points 1-2 or 2-3 there can be any number of bars.




Entry:

In the bullish 1-2-3 set up enter at the breakout of point 2 or few ticks above the bar making point 2. Always remember that point 3 low must not be below the low of point 1.

In the bearish 1-2-3 set up enter at the breakdown of point 2 or few ticks below point 2. Always remember that point 3 high must not be higher than point 1.

[b]Stop Loss

In the bullish 1-2-3 keep the stop loss below the low of point 3 bar.

In the bearish 1-2-3 keep the stop loss above the high of point 3 bar.

for exit trail your stop loss once in a profit and keep doing partial booking.

Some examples:

1) UCOBANK FUTURE EOD chart bearish 1-2-3



2) Failed bullish 1-2-3 UCOBANK EOD chart



3) Nifty intraday 5 min tf date 16-11-11
There are certain in the trend 1-2-3's also which I have not marked.




Regards,

[vinay28]

Sherbaaz, I think your description is reversed for the two figures thereby causing confusion e.g. description of 1-2-3 for bullish W is actually for bearish M. If you agree, please repost.

Also, please clarify how one can know when the end of a trend has arrived.

[sherbaaz]

[vinay28]

Sherbaaz, see this part of your description for example

"A typical 1-2-3 high is formed at the end of an up trending market. Price making final high and then goes down wards which will create a point 2 and from there an upward correction begins and bar making point 3 remember that the correction must not go above the high of bar making point 1, it looks like a W pattern."

Point 2 can not be below point 1 and 3 for a bullish W? It is for bearish M. Am I right?

[sherbaaz]

[vinay28]

One more doubt. If I understand correctly, sometimes (or may be many times) a firm trend reversal is indicated after a lower low (or high) or a double bottom (or top). How do you deal with such situations?

[sherbaaz]

[quote="vinay28"]One more doubt. If I understand correctly, sometimes (or may be many times) a firm trend reversal is indicated after a lower low (or high) or a double bottom (or top). How do you deal with such situations?[/quote

As long as the set up is valid trade it. I dont know how you identify double top/bottom there are couple of variations to it.

Trend reversal is indicated for me as follows:
price breaking the higher low up trend ends and price taking out lower high down trend ends.

Kindly find below the eod chart of nf, with explainations.



Regards,

[S.S.]

hi sherbaazbhai
its a good trading method u had shared..... one thing i want to ask u how do you calculate target or where to book profit ????( i normally booked at the top of the wave where u marked point 1)

[vinay28]

Thanks

[sherbaaz]

[smith06]

1-2-3 system is also very effective with line charts. Which one is more
effective -- line charts or bar charts? Pl. comment.

[sherbaaz]

[S.S.]

[S.S.]

sharebaazbhai i want to ask u one thing from ur chart(first square marked by u)



regards,

[vinay28]

Sherbaaz, you have identified circled area as a "failed" one probably because 3 is below 1. If so, the price did go up. That was one of my doubts earlier where I had asked whether 3 being lower than 1 also may mean bullish or not.