I'm hoping to set the ball rolling for a discussion of trading with 123 formations, after there's been some interest expressed in this method recently in other forums.
These 123 formations can be traded on virtually any instrument and any time-scale. Personally I use these setups to trade US stocks (mainly Nasdaq stocks) by using daily charts.
You can always yahoo for "123 trading system" to look for more information about the 123 formations OR alternatively go to this link (http://www.stoplosing.com/overview.html) for an overview of the system.
I use a derivation of 123 system. Only I trade these setups for trend continuation instead of trend reversal as suggested by the original idea.
Let's hope we can get some interesting discussion going.
persama
28th-June-2005, 01:58 AM
Watchlist for Jun 27, 2005
Potential 123 trades:
GOLD, NDAQ, VPHM
tech/a
28th-June-2005, 07:16 AM
This is probably the first and most basic of technical setups one would be taught.
I certaintly remember it as the first introduced to me when doing the "Securities Institute Course".
It ofcourse follows the technical principal of finding an issue that makes a Higher low AND then a Higher high.
The general term "Very High success rate" I think is misleading---that in itself suggests 70-80%---while not actually given as a % like any technical setup over a VERY LONG period and a wide universe of stocks---unless other filters were included 50/50 success rate is more likely.
How does this differ from "The ROSS HOOK"?
What timeframe are you using for your setups?
In the Gold Chart below which is daily I can see a double bottom which held and also the 123 pattern which has also played out---Not a setup?
Can also post the other 2 charts
RichKid
28th-June-2005, 09:57 AM
..... go to http://www.stoplosing.com/overview.html for an overview of the system.
I use a derivation of 123 system. Only I trade these setups for trend continuation instead of trend reversal as suggested by the original idea.
Great idea Persama, I'm certainly keen on this, here's the material from that link above, the graph referred to is attached below:
The 123 System
This is an incredibly powerful yet simple pattern that can turn your trading around. It is effective with any market and has a very high accuracy rate. This is without a doubt one of the best chart set-up patterns you will see.
- To spot the potential market bottom of any securities price, watch for a new lowest price in the current Downswing (point #1).
- Watch for price to rise from point #1, and then drop again (leaving behind point #2). As price drops from point #2 it approaches (but never reaches) point #1. Price then starts to rise, forming point #3.
- However, if price drops below the point #1, you need to start over. If the price can't break the #1 point, the trend will very likely change.
- When price rises towards point #2, place your open order to go long (buy) at a price somewhere above point #2. At the same time, also place your stop-loss order slightly below either point #1 or point #3. When price breaks above point #2, this is a bullish signal that suggests a change in trend is likely to occur. If price advances, your open order is activated and you are in the market.
When you are in the market, call your broker and tell them to move your stop-loss up as price moves up in your favor and profit accumulates. Keep raising that stop-loss point to either further limit your losses, or to help lock in any profit you've already earned.
Placing your stop-loss too close will cost you potential profit. The more profit you accumulate, the farther behind you can afford to place your stops. Ideal places to put your stop-loss order are at a previous support point on the chart. A 1-2-3 Bottom can actually be a double-bottom. This is where point #3 equals but doesn't exceed point #1.
RichKid
28th-June-2005, 10:02 AM
How does this differ from "The ROSS HOOK"?
What timeframe are you using for your setups?
Can also post the other 2 charts
Also seems similar to the ABC trade set up used via swing charts by people like Safety in the Market (www.sitm.com.au), wonder if it's the same thing?
Nice to see the stop loss placement described as well in that link Persama gave us.
persama
28th-June-2005, 11:23 AM
How does this differ from "The ROSS HOOK"?
A Ross-hook is the first failure by prices to make a higher high subsequent to the breakout of a 1-2-3-low formation (or a lower low subsequent to the breakout of a 1-2-3-high formation), or the first failure by prices to make a higher high subsequent to the upside breakout (or a lower low subsequent to the downside breakout) of any type of consolidation area, e.g. ledge, congestion or trading range.
That means a Ross-hook breakout is a 'delayed' breakout signal if compared to the breakout of a 123 formation. And 'The Ross Hook' also take care about more complex formations such as ledge, congestion and trading range.
RichKid
28th-June-2005, 12:34 PM
Persama,
Are you hoping to show some live trades of international markets using your method? This is one of the few ways in which it can be evaluated, a few of us here do that with explanations of the set up and trade/money management. If not, and if this is just a theoretical look at the method, I may move this thread to the 'Trading Tips/Strategies' forum. You can post charts here as well showing your trades and the application of your methods, there are a few people here who trade international indices and stocks so there will be interest in a practical application. Let me know.
Thanks!
RichKid
moderator
persama
28th-June-2005, 01:48 PM
Hi RichKid,
I am currently paper trade these setups, no real money yet. :o
However I'll post the watchlist and a brief explanation on those setups every trading day but with no promise.
Please feel free to move this thread to the most suitable forum. ;)
persama
28th-June-2005, 01:59 PM
Watchlist for Jun 28, 2005
Potential 123 trades:
DSTl, GOLD, ILMN, LIFC, UPCS
Updates:
NDAQ - Broke Point #2 (19.50). Recommended Initial Stop at 17.74
VPHM - Lower High is formed. Trade abandoned.
tech/a
28th-June-2005, 02:47 PM
You may find the addition of the R/H a valuable filter in your usage of the 123 setup.
Then download the trading phylosophy PDF file 51 pages of great stuff.
will bring possibly a new dimension to 123 setups and trading them.
Mofra
28th-June-2005, 07:42 PM
Also seems similar to the ABC trade set up used via swing charts by people like Safety in the Market (www.sitm.com.au), wonder if it's the same thing?
Nice to see the stop loss placement described as well in that link Persama gave us.
I used the SITM pack years ago, and the ABC trade setup & the 123 setup are very similar - the major difference is the distance between 1 & 2 (A & B) is known as the range and the SITM basic plan looks at percentages of the range to guage a likely exit point. It also has an extra entry parameter, that the retrace to point 3 (C) is less than 50% of the range (also keeps the fibonacchi fans happy).
To be honest, I believe the fact that it is a written mechanical plan and enforces a stop loss is a greater contibuter to success than any perculiarities to the strategy. If you simplify it, you're really just entering an uptrend on a ST pullback which many strategies also attempt to do.
Cheers
tech/a
28th-June-2005, 08:03 PM
Mofra
It appears you have turned on the light---(atleast in your room!)
SPNC - Broke Point #2 ( 6.41 ). Recommended Initial Stop at 5.77
UPCS - Broke Point #2 ( 8.18 ). Recommended Initial Stop at 7.58
tech/a
30th-June-2005, 08:12 PM
Persama
SPNC is fine.
But Im having trouble seeing a 123 in this.
persama
1st-July-2005, 02:47 AM
But Im having trouble seeing a 123 in this.
Your chart is not up-to-date.
Go to http://stockcharts.com/def/servlet/SC.web?c=spnc for the latest chart!
tech/a
1st-July-2005, 07:07 AM
Ahhh Quite correct.
As its a bourse I dont trade in I only upload weekly.
Much clearer and much nicer to look at.I'll upload before opening mouth---
The inside day after the breakout day is common.
What timeframe do you trade?
Do you trail a stop behind the lows as they are confirmed?
persama
1st-July-2005, 07:01 PM
Watchlist for Jul 01, 2005
Potential 123 trades:
ASFI, CAND, ITRI, LUFK, OTIV, PGIC, THOR
Updates:
CKCM, DGIN, ILMN, LIFC, SPIR, STLW, UHCO, WLSN - Scratch from the watchlist. A lower High is formed.
KAMNA - Broke Point #2 ( 18.13 ). Recommended Initial Stop at 16.50
LUFK - Broke Point #2 ( 36.20 ). Recommended Initial Stop at 33.90
tech/a
2nd-July-2005, 04:34 PM
What timeframe do you trade?
Do you trail a stop behind the lows as they are confirmed?
persama
4th-July-2005, 03:15 AM
What timeframe do you trade?
Do you trail a stop behind the lows as they are confirmed?
I am using daily charts to trade.
Trail a stop behind the lows is supposingly the correct exit strategy but occasionally I use my gut-feel to exit.... :(
persama
4th-July-2005, 02:59 PM
Watchlist for Jul 04, 2005
Potential 123 trades:
ASFI, CAND, ITRI, OTIV, PGIC, THOR
RichKid
4th-July-2005, 05:02 PM
Watchlist for Jul 01, 2005
Potential 123 trades:
LUFK - Broke Point #2 ( 36.20 ). Recommended Initial Stop at 33.90
Just thought I'd post these charts as I was checking them as it is much easier to understand the trade graphically for me- LUFK also has one of those 'hindsight' trades in May for the 123 method (the long term chart confirms that it was still a trend continuation- as required by Persama's method (also note the blue EMA which confirms it)). Charts are 1 mth and 3mths.
RichKid
4th-July-2005, 05:13 PM
Persama,
Do you use the 50 & 200 ema in your trades? eg to find a 'continuation' ie when 50 is over 200. That way you could develop a mechanical system I guess so that it filters some candidates for you. Just wondering as those ma's were in one of your charts.
Also in terms of the timeframe tech refers to, do you look to trade on a weekly basis (ie most trades are closed within a few weeks) or do you just let the trade run as long as it's not hitting the trailing stop?
Persama,
Do you use the 50 & 200 ema in your trades? eg to find a 'continuation' ie when 50 is over 200. That way you could develop a mechanical system I guess so that it filters some candidates for you. Just wondering as those ma's were in one of your charts.
Also in terms of the timeframe tech refers to, do you look to trade on a weekly basis (ie most trades are closed within a few weeks) or do you just let the trade run as long as it's not hitting the trailing stop?
Currently I am not using ma as my filter but am thinking of to 'borrow' Stan Weinstein's idea to refine the system....still backtesting the new idea.
persama
7th-July-2005, 02:04 PM
Watchlist for Jul 07, 2005
Potential 123 trades:
ASFI, CAND, CTHR, DCGN, ENTU, ITRI, PANL, PGIC
Updates:
KOPN - Broke Point #2 ( 5.72 ). Recommended Initial Stop at 5.01
SBAC - Broke Point #2 ( 14.32 ). Recommended Initial Stop at 13.20
THOR - Broke Point #2 ( 15.93 ). Recommended Initial Stop at 15.02
AMTD - Lower High is formed. Trade abandoned.
OTIV - Lower High is formed. Trade abandoned.
persama
8th-July-2005, 12:52 PM
Watchlist for Jul 08, 2005
Potential 123 trades:
ASFI, CAND, CRXL, DCGN, ENTU, PANL
Updates:
CTHR - Lower High is formed. Trade abandoned.
ITRI - Lower High is formed. Trade abandoned.
DTM
8th-July-2005, 01:11 PM
ITRI - Lower High is formed. Trade abandoned.
I think ITRI's ready to go up now because it has been consolidating without moving down too much. :2twocents
Watch it move. ;)
DTM
9th-July-2005, 01:26 AM
I think ITRI's ready to go up now because it has been consolidating without moving down too much. :2twocents
Watch it move. ;)
There's your rocket. Up 78 cents within the first hour and half of trading. Just happened to be up making baby's bottle.
Hope you caught that one..... ;)
MARKETWAVES
9th-July-2005, 11:03 AM
123...... FORMATIONS
HAS ITS ORIGINS TIED to ELLIOTT WAVES ....
The ABC SECTION OF an ELLIOTT WAVE formation is identical ....
The point labeled # 3 is a retracement level off of the distance between point number #1 and point # 2
IN WHICH THE RETRACEMT LEVEL IS A FIBONACCI NUMBER ......
EXAMPLE 50% , 618 % 786 % ,,,,,,
ALWAYS RETRACEMENTS ARE PRESENT .........
…………….Please, don't give me credit for pointing out these lines ... I have learned them form studying the work of Fibonacci Retracements and Elliott Waves ..... These lines work well only when they are tied to certain Elliott Wave structures and certain Fibonacci Retracement levels ..... outside of this they become less reliable...... a whole lot less reliable .
This is exactly the reason why you could never back test a particular stock or commodity for these lines without these 2
basic theories of understanding. NOT ALL CHART PATTERNS ARE TRADEABLE .
(This depends on your trading strategy or trading style )
ALWAYS REMEMBER ….
What makes a market place is all of our diffrences of opinions .
------- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
It is far more difficult to Exit a trade than to Enter a trade .... I am sure that you have heard that said before ,,,
THIS IS WHY ,
When making trade it just as important to have an idea where you want to exit as it is to place a stop to protect yourself from a move against you .
( THIS IS A PEARL OF WISDOM )
