The 123 strategy

Price action is always considered the most basic trading theory composing technical systems. In previous
articles, we have presented plenty of effective Forex strategies based on price action and guided in detail
how to use them. Today, we want to introduce to you another simple but efficacious technical strategy,
mainly based on the principles of market performance. The strategy is called “one-two- three”.

Introduction

As we already know, there are always retreating periods in every bullish or bearish trend, and professional
traders consider them perfect occasions to make money. This “one-two- three” is a trend-following strategy,
using three points manually defined on charts to take advantage of trend’s retracements. Broadly speaking,
we will have to determine specific patterns presenting that the risk-trend momentum is weakening, which
highly suggests for a potential resumption of the grand movement.

The general characteristic of price action techniques is the simpleness. As we have already mentioned,
such strategies usually use market momentum to engender trading opportunities, therefore they themselves
contain all the necessary factors to generate returns from trading, and you don’t need to combine them with
any other indicator.

Having been carefully tested by us for the last 12 months, this technical system has generated more than
2000 pips with a win-rate of about 82%.

How to use the system to trade Forex

This system could be applied in all time frames and all currency pairs. However, we suggest using it on the
1-hour chart or higher.

The steps to define a bullish trading signal are as follows:

  1. Determine the lowest point of the bullish trend’s pull, label it “the first point” or “1”.
  2. Define the newest formed lower high, label it “the second point” or “2”.
  3. The third point (3) is spotted when a swing low which is higher than the first point develops.
  4. Given prices turning above the second point, a bullish signal is confirmed. You can enter the market
    with a buying position around the second point.

  5. The 123 strategy

    Conversely, the steps to identify a bearish trading opportunity are as follows:

    1. Determine the highest peak of the bearish trend’s rally, label it “the first point” or “1”.
    2. Identify the newest developed higher low, label it “the second point” or “2”.
    3. The third point (3) is defined when a swing top which is lower than the first point forms.
    4. Once prices penetrate below the second point, a bearish occasion is affirmed. Let’s open a selling
      order near the second point.

    The 123 strategy

    Please remember to wait for the candlestick to be fully closed before making any trading decision.

    The stop-loss level should be set of 25 pips, while the exit could be up to 50 pips.

    Pros and cons of the “one-two- three” system

    Pros

    • Easy-to- use, all-purpose.
    • Generating highly accurate signals by taking advantage of market momentum.
    • No supplemental indicator required.

    Cons

    • Necessitating traders to keep their eyes on the trading platform.
    • Requiring a high level of patience.

    Conclusion

    The “one-two- three” is a quite simple but very effective technical system, allowing traders to follow market
    trends, or literally, market driver’s steps. We totally believe that once being proficient in using this strategy,
    you could generate substantial returns in the long run from financial trading. Anyhow, don’t forget to use
    fund controlling and psychology managing methods, the indispensable tools of every trader, to minimize the
    risk and maximize the profit.
See also:
‘Step’ Forex trading strategy.
‘Step’ Forex trading strategy.
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“Two MA’s” Forex Trading Strategy.
“Two MA’s” Forex Trading Strategy.
29.11.2018
Investment strategies