This article in The Trader’s Indicator Series discusses the 123 pattern, an end of trend market reversals pattern, which is also an integral component of the trader’s toolbox and crucial for manual trading. The previous article discussed other end-of-trend market reversals, so this is a continuation of this topic.
In the last series, called The Trader’s Pendulum, we took you through the 10 Habits, all aimed to support a successful trader. Your mission in developing these habits is to get out of the Technical Trader’s Trap and transform into an Entrepreneurial Trader so that you can start being accountable to your trading. We invited you to take action and begin your journey by completing the Trader’s Scorecard (www.fxtradersedge.com/scorecard) and to get down to business by arranging a free coaching session. In this Indicator Series, we talk about the mechanics of trading.
123 Market Reversals
123 Market Reversals are powerful end of trend confirmations worth highlighting. For a 123 top, the market hits a new high labelled as point 1, and sells off to point 2. It then reverses again and trades higher without taking out point 1. This is labelled as point 3. The trade entry trigger is when price trades down through point 2. The measuring objective is the distance between points 2 and 3 projected below the break down at point 2.
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