Trade The 123 Reversal Forex Strategy

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All I did was search the Internet for a good Forex strategy. Forex 123 pattern strategy I found the candlestick pattern and I never had to look for another strategy again. Actually, all I was interested in was trading entries. I looked at hundreds of different strategies, well, entries. I even spent some forex 123 pattern strategy on a few of them. I had a good handle on my emotions and was a disciplined individual most of the time. Let me tell you now.

I started doing that in All that I had learned in those five years came back to me in a flash I guess I was paying closer attention to it than I realized and I became a profitable trader in just a few months. I said all that to say this: As I mentioned, entries are only a forex 123 pattern strategy part of a successful trading strategy. You forex 123 pattern strategy, losing is part of your job. What is predictable are human emotions. I still use some indicators, though.

They can give you a feel for the direction of the market. But only the price action can show you how our emotions are affecting the market. A Reversal is simply a picture of that emotion forex 123 pattern strategy a candle chart. In the Forex market, everything that happens in an uptrend can happen in forex 123 pattern strategy downtrend as well because currencies are traded in pairs, one against the other.

At the same time, the US Dollar is in a downtrend against the Euro. This is also called the reversal pattern and once you learn to find it you will see a rapid increase in your trading success. The first element to look for in a high is a strong uptrend. The trend should be fairly strong without a lot of retracements and pauses. The stronger the better. To the left you see a potential setup happening. This is a strong uptrend with volume. Something like a pin bar or an engulfing bar.

I especially like to see this happen at a historical resistance level. That just gives it more legitimacy. Again, to the left you can see the same uptrend I showed you earlier, but this time I included some of the candles to the left. After the high point, your next job is to look for a pull-back. It can happen on the same candle, but I prefer to see it on subsequent candles.

It just looks better to me forex 123 pattern strategy way. If it appears to be happening on the same candle, drop down to the next lower time frame and see how it looks down there. This will be the number 2 point of your If the next high exceeds the point 1 high, then your high is blown and you can move on and look elsewhere. To the left you will see what was a potential high that is about to be blown. This was looking like a pretty nice 1 2 3 trading strategy pattern until the last few minutes when it started to test the number 1 high.

Officially, your trade entry is a break of the number 2 point to the downside. Certain pattern strategy occur regularly on charts. The reasons these patterns continue to forex 123 pattern strategy trading opportunities is that the emotions that caused these patterns are consistent and happen frequently. The number 1 point occurs at a place where traders who were long in the market decide they need to secure the profits they made during the trend up.

That surge in volume usually happens when a move has reached exhaustion. This is the number one point. Of course, after there are no more forex 123 pattern strategy to buy up the positions the latecomers entered, the price starts to drop. As the price drops, the smart money sees an opportunity to possibly make a little profit on another pop to the number 1 high, but they are less committed because most of the longer term momentum indicators are still giving overbought indications and the market has just made a big up move.

Eventually, all the latecomers that bought while the market was at the peak are experiencing fear. As the market continues to drop, they unload those positions to the smart money — who are more willing to buy forex 123 pattern strategy the price drops lower.

Until there are no more folks wanting to sell. Now that the latecomer sellers are gone, prices will start to move up again. The smart money folks bought from the latecomers, so now as it starts to go up again, the latecomers figure they got out too soon and start buying again, but since they were burned before, they are a little more wary, so fewer of them get involved this time.

And of course, the smart money folks are more than willing to take their profits as the market goes up. This is the number 3 point. As the market forex 123 pattern strategy to drop from the number 3 point, the more educated, smart money traders recognize that this could be a reversal or the beginning of a trading range, but at the very least, they are willing to sell down to the number 2 point again — which is exactly what we will do.

This causes prices to drop back to the number 2 point — often breaching the number 2 point by a few pips. As I mentioned before, reversals most often happen at areas of support and resistance. They happen after a good strong trend. They can happen on any time frame on any instrument. On the shorter time frames less than one houryou have to watch continually or you will miss your opportunity.

Often you can see one after a big news event. I know folks that do it on the 1 minute charts and make lots of pips daily doing it.

You have to know your strengths and limitations to be a profitable trader. I use three different entries for the My favorite entry is cheating the number 3 point as this can be done with very little risk, fairly large trade size and works quite well.

Also, the forex 123 pattern strategy position, while having a low forex 123 pattern strategy in terms of pips — also has a lower probability of success. Because of these factors, I usually use about half my standard trade size on the first position. I then use half on the second entry and half on the third entry. Use it with our compliments.

The completion of a number 3 point is the first indication that a reversal may be occurring. When I see the first two points and see price pop to the number 3 point and start to drop, I start anticipating the entry. As soon as price breaks below the highest candle at the number 3 point, I take forex 123 pattern strategy short entry with a stop loss just above the number 3 point. In fact, once you have a number 3 point, you can put a pending short a few pips below the number 2 point.

How far below the number 2 depends upon the time frame you are trading. When trading the hourly time frame, I usually put forex 123 pattern strategy order 5 pips below the point. Be sure to make allowance forex 123 pattern strategy the spread. I like to trade this using a forex 1hr chart strategy. As I mentioned, the risk is greater on the second entry. You need to place your stop a few pips above the number 1 point.

You should target the consolidation from where the uptrend began. That will give you a good risk-reward ratio. Hout of all of the currency trading strategies I have traded this is by far my forex 123 pattern strategy. After the price drops below the consolidation at the number 2 point, it most likely will pop up in a retracement the market likes to let off steam after breaking a significant barrier like the number 2 point — traders taking profits.

That retracement will give you your opportunity for your third position. Watch for the price to pop and then drop just below the low of the highest candle in the retracement. Place your stop above the retracement for a forex 123 pattern strategy tight risk and target the same place as the second position, the consolidation from which the initial uptrend came. And there you have it. Remember that everything I said about a high applies in reverse to a low.

I always thought it was confusing when writers tried to address the opposite forex 123 pattern strategy trades right in amongst the other trades so I tried not to do that. Remember that not all reversals will look perfect. Not all reversals will give you an opportunity for all three positions forex 123 pattern strategy.

You will take losses with this reversal pattern strategy so be prepared for that. And please leave comments and questions below. What is a Reversal? Why do Reversal occur? When do Reversals occur? How do I trade a Reversal? How do I determine position sizes? How do I enter and manage the positions? Trade Entries for the ugly High. The following two tabs change content below.

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