1-2-3 pattern is a good method for detecting trend change. Trading with this method allows the trader take advantage to enter early on the new trend. In my trading I usually use 1-2-3 patterns as a part of some other indicators or divergence to confirm the trend change.
|1-2-3 pattern and entry|
Trading 1-2-3 patterns
I will now explain how I use to trade this method. Select the currency pair and time frame you want to use.
lower high (LH)
lower low (LL)
higher high (HH)
higher low (HL)
From up to downtrend, price start to make new LL and new LH.
This is the time when 1-2-3 pattern shows up. When we see new HH and HL forming in downtrend we measure the latest LL as number 1, new HH as number 2, and the new HL as number 3. Vice versa for uptrend.
1 pip above the HH candle (2). Stop loss 2 pips below the HL candle (3). TP is same amount of pips as SL.