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dzonefx
dzonefx
Moderator
Number of messages : 636
Points : 3981
Date of Entry : 2013-01-29
Year : 49
Residence Country : Beograd

ma1 1-2-3 Trading System

on Sat Jun 13, 2015 7:54 pm
1-2-3 Signal
This is,without dubt,one of the very best chart set up patterns you will ever see.Once you train your  eyes you will see them all over the place.At the beginning of a new trend.At the end of a retracement.Within a trading range.Within rising or falling trend.

Like any other pattern they are NOT 100% successful.But out of every other pattern this is by far the most accurate and most profitable.If you want to become an expert in one chart pattern set up,this is it !

Whilst these patterns are 95% object ional when you become an expert in spotting them you may start to introduce a slight subjective analysis into this pattern.

This is what I am going to explain to you:

1. What exactly is a 1-2-3 pattern?
2. Which charts and time frames do they exist?
3. The entry “trick”.
4. The exit.
5. Conclusion.
6. Products.

My goal here is define the 1,2,3 patterns and how to trade from it.It is not my intention to pad the report out and charge double the price.

How does it fit in with my other works?I really like to keep my eyes on the 1,2,3 patterns in very oversold/overbought markets.Especially on the stock indices and the futures markets.And whilst this method is very profitable trading the liquid,big cap stocks,my stock trading approach is much more suited to the methods.If you are a pure stock trader,then use the1,2,3 to determine trend changes an the major indices and keep your eye open to spot them on the stock you are following.If you are a futures trader as well , would seriously consider not only looking for 1,2,3 patterns as to major moves but adopting this into a comlete trading system.

What is 1,2,3 pattern?

Good question.A 1,2,3 is simply best explained by looking at some charts.Here are some recent stock charts:
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Above is simply a daily bar chart of the stock of the big blue chip US stock General Electric.
Clearly marked is the 1,2,3 pattern that evolved in Febuary.Simply put it is a 1,2,3 buy pattern.
It’s a bottom,a correction,a retest that dose not go beyond the original bottom,and then a rebound beyond the correction.Bit it is very simple when you look at the chart.
• Point 1: This is the bottom.
• Point 2: This is the correction.
• Point  3:This is the retest the does not go beyond point 1.If it dose then all best are off.The pattern dose not exist.Scratch it off and move on.

Once you have a valid 1,2,3 pattern then place your buy order in at the –breakout-  of the number two point on the pattern.Honestly, it is a very simple pattern that always give lots of opportunity and a gret risk/reward ratio.Once you grasp the fundamental basics and practice you will see them all over the place.
[You must be registered and logged in to see this image.]
Here is an exercise to perfom now
• Get a blank piece of paper and a pen.
• Starting at the top left hand corner draw a diagonal line to the center of the page.
• Were you stop mark this with a big number 1 .
• Now from this point draw another diagonal line towards the top right hand corner but only go about half way up.
• Mark this point with a big number 2.
• Draw a diagonal line from the number 2 point,parallel to the first line,down towards the bottom right hand corner.But do not go anywhere near as far down as your number one point.This line should be your shortest one.Make it about half the length of your number 2 line.
• Mark this point with a big number 3.
• Now you a zig-zag pattern,marked clearly as a 1,2,3 . Now draw a flat,horizontal line right on top of the number two point.On top of this line write: Buy Here!
• Now imagine this is a stock you have been observing and it has formed a 1,2,3 bottom.If that horizontal line across the number two is taken out then you have a valid buy.
• For a 1,2,3 topping formation that gives a valid sell signal simply reverse the whole procedure.
• Practice,practice and practice some more until the pattern is firmly fixed in your minde.It takes a little a little time and effort to grasp the pattern but it is like riding a bike,when you get it right,you will never to learn it again.

This is how your drawing should have looked:
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Let us have look at a few more examples:
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Now knowing what you do about the 1,2,3, signal can you spot how many valid 1,2,3, buy and sell signals are present on this daily bar chart of General Electric?( there are twelve) .It may be difficult for you to spot them on this shrunken down version… that is not the most important point.The point is I wanted to show you how amazingly consistent this pattern is.
Examples:
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Practice drawing 1,2,3’s and looking for them on your favourite stocks and futures markets.They happen all time and are about 70% accurate in the price prediction.Let’s look at different charts and time frames with 1,2,3, signals.

1,2,3, Time Frames
Ok to quickly recap this is what a valid 1,2,3, signal looks like on a bar chart.This is a perfectly formed  123 signal.But as we all know we not live in a perfect world,especially when it comes to looking at stock charts.
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So there is absolutely nothing wrong whit 123 formations forming over several bars as opposed to the one bar corrections above.Let us have a look.
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As you can see sometimes the 123 pattern happens very quicly or it can take time to develop.

Here is an important point for you to remember:
Generally the more bars that are involved in the 123 buy or sell pattern the bigger the move.In the above three examples I would expect bigger moves form the last two examples as opposed to the first one.Simply because there are more bars involved in the 123 patterns.Like I say it is a general rule.Not hard and fast.Something for you to chew over.

Now,123 patterns happen an all time frames.I mean from 5 minute tick charts right the way through to yearly charts.As I have never and never will day trade I am not going to show any examples of this.But let’s look at weekly and monthly charts,just to prove to you that the 123 pattern is valid in these time frames.

Weekly Patterns:
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123 bottoming pattern gave a valid buy signal at $9.80.This share was at $14.50 at the time of writing.A whopping 48% gain 10 weeks.Who knows where it will end up.Consider this.How long did it take me to spot,manage and profit from this trade?Considering this is a weekly bar chart.A few minutes on a weekend.If this doesn’t prove what a fantastic signal the 123 is…. You are a tough one to please.

Ok let’s look at one more:
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British Pound futures contract,viewed on a weekly bar chart.Again,a very powerful up trend after the valid 123 buy pattern.

Lastly,let me prove that this 123 pattern is just as valid on a monthly chart as it is on any other time frame.
[You must be registered and logged in to see this image.]
About how generally the more bars that are involved in the 123 pattern the more powerful and long lasting the move is.Where do you now think the biggest move is:
A) A daily chart where the 123 develops over five bars?
B) Or ,a monthly chart where the 123 pattern develops over ten bars?

Of course you said B.Bear this in mind.Generally 123 patterns on monthly charts indicate a much bigger trend development than a 123 on a weekly chart.A 123 on a weekly chart indicates bigger trend than one developed on a daily chart and so on…

Here is a very general rule of thumb table for you to consider.Consider that if you spot a 123 bottom on the NASDAQ monthly it could signal a new bull market that could last 6 months to two years plus.

123 Length of chart…… Generally the move could last

  • Daily chart                        2-8 weeks
  • Weekly chart                    4-16 weeks
  • Monthly chart                   2 to 12 months


Type of Charts 123 patterns develop on?

I’ll be very abrupt with this. 123 patterns appear on all of the charts.Bars,Lines,Renko,P+F,Candlestick.
It makes absolutely no difference.The exact same pattern plays out the same.

Here is an example of a line chart showing a 123 pattern.
[You must be registered and logged in to see this image.]
My only tip when using the 123 pattern with a line chart is to use weekly/monthly only!
Daily gives too many false signals.

Here is anew one for you.The Nasdaq market viewed on a Renko chart.Spot the successful 123’s.
[You must be registered and logged in to see this image.]
Using the 123 pattern on the indices on a weekly/monthly basis is one of  favorite techniques as to spotting overall market trend changes. When I see a 123 my favorite techniques as to spotting overall market trend changes.When I see a 123 bottom on a weekly/monthly chart I get very excited.If you spot one I urge you to make the very best investment .
dzonefx
dzonefx
Moderator
Number of messages : 636
Points : 3981
Date of Entry : 2013-01-29
Year : 49
Residence Country : Beograd

ma1 Long Short Stock and Futures

on Sat Jun 13, 2015 7:57 pm
I have shown you how the 123 works on:
• All time frames.
• Both buying and selling.
• Stock.
• Futures.
• Line/Bar/Renko charts.
If you can chart it,the 123 pattrn will appear.Now,lets look at a slight trick for entry once have your 123 pattern.

The Entry Trick

Note;
Buy or Sell breakout is of the number two point !
[You must be registered and logged in to see this image.]
Above simply show the valid 123 top an bottom patterns and where to place your buy/sell points.At the break out of the number two point.But,you see there are many traders,systems..etc,which blindly sell and buy at the breakout of ever pivot point on a chart.What we do know is there are usually many orders placed at the breakouts of these points.

Now,whilst this is good really need to beat the crowd.You want to be in the market just before the masses.
How do you think you can achieve this?
Easily.Simply bring your order slightly in.In a buy point buy at a slightly lower price than the breakout of the number two point.
[You must be registered and logged in to see this image.]
So no big secrets here.Instead of simply buying at the breakout and joining the mass of other buy orders as they scramble to get onboard the break out just move your buy order in so to enter the market before most others.This will cut down on your slippage and ensures you will get a big initial move on your order.

Let’s take a look at a sell order:
[You must be registered and logged in to see this image.]
Now by how far you move this buy/sell in is your choice.There is no exact scientific amount.Bear in mind you are simply trying to enter the market before the masses.So you do not want to get in too early where the stock/future never breaks out beyond the number two point.

On the other hand,you want to get in whit plenty to spare before the masses enter on the breakout.

Note!
Remember to keep a tight (no more than 10% ), initial stop loss once you have entered your trade.

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