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Forex trading strategy #4 (Simple 1-2-3 swings)

And here we are again talking about the strategy that withstood the test of time. This Forex trading method is based on the same study of defining support and resistance levels and trading upon the fact of their violation.

A trading setup requires only an open chart and no restrictions for the currency or timing preferences.

Entry rules: Once the price makes it through the “pivot Line” - dotted white line on the figure below (drawn using the latest price peak) - and closes above (for uptrend) or below (for downtrend) the line buy/sell accordingly.

Exit rules: not set. However, exit can be found using Fibonacci method; or traders can measure the distance between point 2 and point 3 and project it on the chart for exit.

Additions: as an additional tool traders can use MACD (12, 26, 9). The rules for entry then will be next - let’s take a SELL order:

When MACD lines cross downwards, you look for 1-2-3 set-up to form. When the price starts “attacking” the “pivot Line” you check that MACD is still in SELL mode (two lines are heading down). Once the price closes below the “pivot Line” – place Sell order.


Same chart: MACD (12, 26, 9) is added.


Advantages: gives 100% profitable entries.
Exits update: Exit strategy page 4

Please advise if the "latest price peak" is the last lowest point or the last highest point. Or is it the last low point after a small swing, even though not the lowest point.

Many Thanks,
Neelan Narasimulu

Yes, it is the last lowest/highest point followed by a pullback. Once we saw a pullback, we can draw a horizontal line through the lowest(downtrend)/highest(uptrend) points and wait for the price to breach the line and close on the other side.

Thanks for the great website! Let me add some notes to this strategy.

First of all it has indeed no time frame limitations, e.g. can be traded on 1 minute charts with the same success as on weekly ones.

I'd like to add that in general the larger the number of price bars involved in 1-2-3 pattern the larger is the move after a breakout. This helps in trade planning and exits.

Keep good work!

Dear Edward,
I just want to ask that do we need also to look on the direction of MACD histogram ?
Also, I try to use MACD indicator but always just show up one line, I don't
know how to show two lines like yours ?

Thank you for your help.

Yes, you can simply look at MACD histogram to filter out Buy/Sell suggestions: reading above zero line will suggest a Buying mode, below - Selling.

About MACD lines and settings, the comments on this page should help:

Should any questions remain, please feel free to ask.



Hi Edward

Could you help m ?How much is the stoploss fr this system

Hany M.

Hi Hany,
Stop loss is always below (uptrend)/above(downtrend) point 3.


great system! My problem is that quite often I get stopped if setting my loss at the "3" point. In your chart, if I buy at the second "ok", the following candle has a shadow that is slightly below the "3" point. Even though the price increases, I would have gotten stopped by that shadow. Anything to overcome this issue (wait for candle to close before taking loss or similar strategy)? Thank you so much!