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  1. #1
    Administrator Martin Kay's Avatar

    The 1 2 3 Strategy: Easy as A B C, profitable as an ATM? !!!

    The 1-2-3 strategy is used by Forex traders, stock traders and equities traders, so what about Binary Options trading? let us know

    Originally posted by Bogdan G. Click here for the full 1-2-3 strategy review.

    Why the 1 2 3 strategy doesnt suck

    This strategy withstood the test of time and its been used by Forex traders, stock traders and equities traders, being a pure price action strategy, with sound support and resistance principles. It is mainly referred to as a reversal strategy, but it can also be used in line with the trend. Ok, now look at Picture 2 and notice how the highs and lows are numbered in the newly formed downtrend and how many Put opportunities we had, all successful. In Picture 2 we enter the market each time the support formed at point 2 is broken. Most important, all the trades were taken with the trend. Also, we are protected by a bad trade: in Picture 2, our trigger to enter the market again would be the break of the last point 2 (the lowest one), but since this doesnt happen, we stay away of a losing trade.

    Why the 1 2 3 strategy sucks

    I mentioned the words reversal pattern and that is where the strategy can start to suck. Everybody says Go with the trend because its your friend and they are right, the probability of success is greater with trend entries. When trying to identify reversals, we can get burned easily if we were wrong and it turns out to be just a retracement. But we can avoid this by following the simple rule if point1 is surpassed in the opposite direction, all bets are off; this way, we dont enter the market and keep our money safely in our pockets or, we can trade differently, according to the new conditions. Something that can keep a newbie away from this strategy is the fact that they can get easily confused by the 1 2 3 highs and lows, at least in the early period of using the strategy, but trust me, after a while, all the pieces of the puzzle will fall into place and things will be a lot clearer.

  2. #2
    Senior Member Grae's Avatar
    Great work Bogdan.

    I fully support the approach to trading. It strips the chart clean(no confusion for newbies) and also uses the greatest indicator of all time... Price Action Itself. If you want to know where the market is going- Ask the price...

    Can it also be referred to as the head and shoulders formation?
    Kind regards,
    Graham

  3. #3
    Rookie Member
    Hi guys.

    I found this site very helpful for me that am a newbie. I'd like to ask you which is the best timeframe to apply this technique.

    Thank you very much.

  4. #4
    Master Member Bogdan G's Avatar
    Quote Originally Posted by Grae View Post
    Great work Bogdan.

    I fully support the approach to trading. It strips the chart clean(no confusion for newbies) and also uses the greatest indicator of all time... Price Action Itself. If you want to know where the market is going- Ask the price...

    Can it also be referred to as the head and shoulders formation?
    Kind regards,
    Graham
    Hi Graham,
    I'm happy that you like the strategy and to see that you are a price action trader. Now for the two patterns (1-2-3 and HS): although they are both reversal patterns, they are not the same. The Head and Shoulders pattern has a Higher High and that would be our "3" point in the 1-2-3 pattern; and we know that in a valid 1-2-3 pattern, point "3" must not surpass point "1". Check out the picture attached for a valid HS pattern (hope the size allows you to see well).
    If we were to dissect further the 2 patterns, we will see that the 1-2-3 pattern can be a part of a HS pattern, completing it. However, the rules for entry differ in the case of the HS (you wait for the neckline of the HS to break before you enter). Hope I'm clear enough. If not, please let me know and I will explain again, with more pictures.

    All the best
    Bogdan

    Click image for larger version.

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  5. #5
    Master Member Bogdan G's Avatar
    Quote Originally Posted by franky View Post
    Hi guys.

    I found this site very helpful for me that am a newbie. I'd like to ask you which is the best timeframe to apply this technique.

    Thank you very much.
    Hi Franky,
    Nice to have you aboard.
    About the time frames: usually all chart patterns have more reliability when used on the higher time frames, but they occur in all TFs and they do have good impact.
    I use multiple time frame analysis when I enter a trade; if my signal comes from the higher TF and i see a 1-2-3 pattern, or HS or Double Top/Bottom on the lower TF and those patterns agree with my signal from the higher TF, i take the trade. Sorry if it seems too complicated To answer your question, use at least H1 time frame for chart pattern recognition. A simple strategy that does involve Price Action, but not chart patterns (just one Japanese candle) is the Pinocchio strategy. You can find it on the website. If you have any questions, please let me know.

    All the best
    Bogdan

  6. #6
    Rookie Member
    This system is sweet. my suggestion is trader small till you mater the system. Like Bogdan G said, it can take sometime to get use to it especially as a newbie.

  7. #7
    M.J
    M.J is offline
    Veteran Member M.J's Avatar
    It is kinda pure PA with not even a single indicator. I would love to give it a try. It is too soon to call it an "ATM".

  8. #8
    Master Member Bogdan G's Avatar
    Quote Originally Posted by M.J View Post
    It is kinda pure PA with not even a single indicator. I would love to give it a try. It is too soon to call it an "ATM".
    Yeah man, naked charts and Japanese candles, just how they used in the old days, before all the indicators started to appear.

  9. #9
    M.J
    M.J is offline
    Veteran Member M.J's Avatar
    Quote Originally Posted by Bogdan G View Post
    Yeah man, naked charts and Japanese candles, just how they used in the old days, before all the indicators started to appear.
    Yes.. this tool can definitely help Price Action users. Small fluctuations and false signaling will not be a problem for the users of this tool. But I think users should understand basics of this tool. Mathematical formula behind this tool is pretty simple and u can easily find explanation by googling it. If u understand the formula then u can use this tool in much better way.

  10. #10
    Master Member Bogdan G's Avatar
    Quote Originally Posted by M.J View Post
    Yes.. this tool can definitely help Price Action users. Small fluctuations and false signaling will not be a problem for the users of this tool. But I think users should understand basics of this tool. Mathematical formula behind this tool is pretty simple and u can easily find explanation by googling it. If u understand the formula then u can use this tool in much better way.
    MJ, I am confused. What mathematical formula are you talking about? There is no math formula behind the pattern and the numbers (1,2,3) could easily be replaced by letters (A,B,C) or any other type of identification. The numbers just identify highs and lows which eventually will form a tradeable pattern.

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