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

I think this is one of the best systems to use if during breakout you got out too early! I try to risk less with each reentry.

Alex Liu

It surely can be traded as continuation pattern.
It will all depend on price momentum and proximity of support/resistance levels.

Regards,
Edward

Hi user

Thank you for that link, it sure does help.

Explain the mechanics of the 1.2.3.
http://transcripts.fxstreet.com/2008/12/monthly-webinar-part-1-the-123-c...

Hope this help's..

This strategy is amazing! just amazing! It really seems to be 100% accurate.

My only question is, why? Why does it work? Why do prices breakout after 1,2,3 formations? whats so special about them? Can anyone explain to me the market mechanics of it? The only way to make it even more foolproof is to see whether the logic behind it is sound.

Hi Dan,

If you use MT4, try this indicator: Good_Macd.mq4

Otherwise, don't worry, 1 line MACD works the same as 2 line.

Regards,
Edward

hi, i would like to know how to get the two lines on the macd. my platform only has one(red. can i lot the trigger?
help
dan

Hi,
For Exit rules traders can can measure the distance between point 1 and point 2 and project it from point 3 on the chart for exit.

Regards,
Mohammad

Thanks Ed for the reply. Abbey crown

Hi Abbey,

1. Use fractals indicator. That's the easiest way.
You can find it on MT4 platform.

2. If price closes far away from point 2, it is risky to enter targeting point 3.
Thus, in order to never miss a good breakout, combine this method with Simple breakout system. Exactly as described there, you can take 1 hour (or any other higher time frame) chart where you'll identify 123 setup, then as price approaches the breakout line, you switch to 5 min and wait till on 5 min chart price breaks through the breakout line, and the first 5 min candle closes. As soon as it closes, you enter a trade.

Regards,
Edward

Hi Edwards, Please i need u to clarify these question? about this strategy.
1. How can i know the highest or lowest point for point 1. Should i use i.e MACD crossover crossing downwards when above 0 for the highest point 1 for a sell entry or what do u suggest?
Question 2. What if the price bar closes far away below/above from point 2. Is it advisable to enter the trade targeting point 3.
Thanks.
Abbey Crown

Fixed stop-loss is below (uptrend)/above(downtrend) point 3. The calculation point 2 - point 3 is (for example) 50 pips. Then you risk 50 pips to earn 50 pips, it means RRR 1:1. The "RRR" does not calculate probability of success in %.

It seems to me that a 1:3 risk/reward ratio is also contingent on probability of success. If a breakout only happens 50% of the time, then you are correct that the risk/reward is 1:1. If a method demonstrates a 75% probability of success, and your target profit = stop loss, it would present a 1:3 risk/reward ratio. Am I thinking of this incorrectly?

Hello to all,

as it was mentioned here, "stop loss is always below (uptrend)/above(downtrend) point 3". Many For the Profit Target is recommended „calculation to use the lowest low and the highest high of point 2 and 3“. Forex strategies recommend to focus on 1:3 RRR (Risk/Reward/Ratio) and higher. Using both rules above, we cannot never achieve RRR 1:3 or even higher. It would be RRR 1:1 and that method is very risky.

Have a nice day
Michael

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Thomas