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It consists of 4 important
elements (the example is for a bearish fakey):
Behind the 1-2-3 pattern as a countertrend pattern is exactly the same story.
Showing you a EURUSD (daily) example:
Of course, the image is an ideal example. But for learning we need good working examples.
There are much different specialties, e.g. the more bar false breaks.
A lot of questions appear while trading this setup:
1. Where are the best event areas to trade it ?
2. Can we classify the quality of a 1-2-3 patterns? (Occurs at weekly, monthly swing line; the
longer the consolidation range the better; quality of the false break day (pin bar or not))
3. Does it make sense to use different money management rules depending on the setup
quality (point 2.)? (It does and its in my view very important)
4. Are there defined target points (there are!)
5. What is the difference between 1-2-3 pattern and ABC reversal (ABC is a correction within
a trend, you trade an ABC always in direction of the main trend)
6. Does it make sense to trade a failed 1-2-3 reversal in the direction of the main trend? (It
does!)
7. How the 1-2-3 idea corresponds with price action trading? (Its fakey trading on a complex
level)
8. Can I use countertrend trading with the same risk per trade as in "normal" trading? (As a
beginner you cant! It kills you!)
9. Can I trade 1-2-3 in all markets? (HHmmmm, basically yes, but ......)
10. Can I trade 1-2-3 on lower timeframes too (no, impossible, only daylies and higher tf).
11. Im not feeling good being a top and bottom picker (but thats the sense of the 1-2-3
setup; try to sell highs and buy lows)
12. If I try to pick tops and bottoms, how does that concur with Nials articles about these
types of traders? (It does, if you have a good money management)