GBP/USD 123's

[matrader]

6 to go

 

[Pipmaster1]

I might just kepp posting any old tat till I get senior satus...

LOL, i didn't even notice that! good times

 

[matrader]

By the way pipmaster...I meant to ask before ....do you normally look for 123's(Hi & Lows) on a daily /per 24 hour period.
Thats what I do.
learned to look for them on daily charts but found they work on al time frames.

 

[4xpipcounter]

33 to go.

6 to go

 

[Pipmaster1]

No, I always start with the 30 min chart which has the RSI 3, RSI 14 and the CCI under that. I learned that from the forex school, thats how we would get our bias and where we started when we were doing price action trading. I have posted 3 pictures to help example my process, I guess I should have done that from the start to make it less confusing.

As you can see the 30 min chart with the RSI's its showing that price is over bought, RSI 3 is below the blue line showing it is really extreme. Now after I see what the RSI's are up too I'd go to my 1-2-3 charts which only have the 40EMA and the MACD on them for indicators. Notice the 4hr 123 chart, it is starting to fall into place, notice the MACD cross is between the #1 & #2 point. Now I usually don't post pictures this early in the set-up since price could just blow through the 40EMA and not do anything. If that were to happen then I'd double check the 6 hour chart to see if it was setting up there. I have added a 30 min 1-2-3 chart, notice how price has blown through the 40EMA, this is to show how different the set-up can look depending on what time frame you are looking at. But this 30 min chart means nothing to me at this time.

My over all conclusion albeit very early, is that even though the 30 min RSI's are extreme , price could continue to trickle down the 40 pips to the 4 hr 40EMA, and giving us a #2 point, and with the time of day what it is with New York and London being close I'd say thats a good chance it could do that. And with the RSI's in position price may turn around and start to retrace to the #3 point, hopefully a retrace to the 61.8% or 76.4% line.

If I were to GUESS, since this is a 4 hr chart maybe by tomorrow's London open we could be seeing a #3 point, and the 30 min RSI's extreme and showing price over sold, ready for a turn down. This would then get me to look at my 5 min and 1 min trigger charts, honing all of this down to a single trigger candle. Selling at the #3, a possible 76.4% failure with my stop a few pips above the #1 point. However none of this may happen, who knows, but I'll hopefully be ready when the next 1-2-3 sets up and take advantage of the opportunity to make a profit.

I hope that is not too confusing, can you tell I love this stuff? I can talk trade all day long.

Oh and just so you know all three pictures where taken at the same time.

Ryan

 

[Pipmaster1]

I saw price was turning around a little early for the 4hr chart so I went back to the 3hr chart. I had wrote this chart off since the MACD was not in the right position. Notice it crossed before the #1 point. However, That is one of the prettiest #2 points I've seen in awhile. That is exactly what I love to see. As far as a visual representation goes. Also I'd like more than 3 candles between the #1 and #2, just don't feel right. But that is certainly how I like to see the candles touch the 40EMA to form the #2. :clap:

 

[Pipmaster1]

Hey look at that!!!!! :clap: Thats what we were waiting for! Very nice #2, so far, have a few more hours before that 4 hour candle closes!

 

[Pipmaster1]

Well price did end up blowing through the 40 EMA, which was not a total surprise. and it looks like the beginnings of a 6hr 123. And thus the way of trading 123's goes! :whistling

 

[Pipmaster1]

Here is another short 20 min 123. I almost sold at the red arrow, however the 30 min RSI's were not extreme enough, also time of day was an issue. I really don't like getting in when both New York and London are both closed, and finally it is again going against the long Daily 123.

 

[Pipmaster1]

Like it when the rulers and filters you have in place keep you out of the market for good reason. That 20 min 123 feel apart and continued higher. Would've been a loser.

 

[Pipmaster1]

The Daily 123 is looking pretty good so far. Definitely has a ways to go, but looks good.

 

[Pipmaster1]

I thought I'd post what I'm seeing form up at the moment. The Daily long 123 is still in play. However a retrace would not be a surprise though. So there is a possible #2 forming on the 3 hour chart. Also the 30 min Fib sequence is suggesting a move down as well. Not sure how that will play out since the 3 hour #2 needs to turn around right now. Time will tell, but the 3 hour retrace to the 61.8% or 76.4% retrace is what I'll be watching.

 

[4xpipcounter]

Pipmaster, it seems your 1,2,3 system is easy for most people to learn--watch for the swing low-1, swing high--2, swing low--3, as long as it is higher than 1, and then go long when the 2 is broken. Vice versa for a short. Do your Fibs come into play to decide turning points and extensions?

 

[Pipmaster1]

Pipmaster, it seems your 1,2,3 system is easy for most people to learn--watch for the swing low-1, swing high--2, swing low--3, as long as it is higher than 1, and then go long when the 2 is broken. Vice versa for a short. Do your Fibs come into play to decide turning points and extensions?

Yes I will agree that at least on the surface my 123's are really simple. I will add that I have 8 years of experience and 3 years will this method in particular so there can be a lot going into how I see any one trade.

As I have pointed out before the #2 point need to meet the 40 EMA and then retrace, so there are some added filter for me to call it a 123 that could become my trade. And to answer your questions let me clarify that Fibonacci retracements that we are all familiar with are very different from my Fibonacci Extensions or Sequence.

First Fib retracements do play an important role in determining the #3 point and also an entry point after the #2 has been broken. Ideally I like to enter in both places at a 76.4% Fib failure, but will take a 61.8% Fib failure.

Second the Fib extensions/sequence is only on the 30 min chart. Take a look at the picture again and you'll notice the 2 EMA's on the chart. I get the price of the intersection of the EMA's and then add or subtract the Fibonacci numbers from that price. In this case since price is trending down we subtract, which is why those lines are "55", "89", "144"....and so on. So the general rule here is when price closes below the 55 Extension then price has a good probability to go to the 89 Extension, and if it closes over the 144 it should go to the 233...etc

I do watch this as a secondary filter, but depending on how choppy the market is it can not be easy to read or just not apply. However when there is a nice clean cross like today it is wise to not trade against it.

So since the 15:00 30 min candle closed below the 89 extension I wouldn't be caught long in this market since I think it has a high probability for price to go to the 144 extension which is 1.4693

Also notice that the Fib extension continued down and the #2 on that 3 hour did not set up. However the 6 hr has a possbile #2, I don't think much of it, since there is only 3 candles between the #1 & #2 points, and how the FIB Extension is suggesting that price is moving downward.

 

[Pipmaster1]

Look at that. Cool when price does that. Went right to the 144 Fib extension. How did I guess that??? hhahahaa! shuriken:

 

[Pipmaster1]

Here is a method I used to trade. A barrier break at or close to the London open. I haven't watched this in quite some time. Couldn't help but notice this one. Typically when this would happen I'd be looking for a price action trigger to jump in at. Not sure if this would really be a good barrier to be watching. For this method probably the high on this chart that was formed at the 2:00 candle on 6/20/2010 would be more of a proper barrier to be waiting for. However the RSI's being extreme combined with the 76.4% failure does look pretty good.

The 1 min price action trigger came at the close of3:22 giving an entry at 1.4869 with a possible stop at 1.4882, which gives a 13 pip stop.

But who knows, I haven't traded price action like this in awhile, kinda fun to look at it every once in a while. LOL, i love this stuff. :whistling

 

[Pipmaster1]

LOL, price can be as fun as it can be frustrating. Its is crazy that price missed my stop by 1 pip 3 different times. These tight stops are nice too. I use a 5% max risk on my 123's, and also in price action when I traded it. SO this trade would have done pretty good.

Account Balance $1000

Risk 5% = $50

The stop was only 13 pips. So trading super mini's @ .10 per pip thats 38 lots. So the math would go like this:

38 lots X $0.10 = $3.80 X 13 pip stop = $49.40 would be total risk.

The cool thing with this kind of leverage in this trade you’re making 20% profit every 52 pips!!!!

But this looks like its about to stop me out. If price were to continue down I think I'd look to exit around the 1.4800 price, depending on my indicators of course.


Before I could hit submit price jumped up and hit my pretend stop! LOL....that was cheap entertainment for an hour! HAHAHA

 

[Pipmaster1]

On a more serious note, 12 hour 123 trying to form up. I think I have decided to wait for the high probability trade form up, which is the retrace after the break of the #2. Until the long Daily 123 is done with, especially when they are going against the Daily 123 like this one.

 

[Pipmaster1]

Here is yet another short 30 min 123 I let go. The 30 min RSI's were not as extreme as I like, and look at the Daily 123 chart...who wants to step in front of that freight train?? The Daily just keeps moving upward, I wonder if it'll hit the 200% line by the end of this week?

 

[Pipmaster1]

The Daily 123 is getting closer, but not there yet. It is really too bad that the stop was too big to get in on this trade. This is how this trade would have played out if I was trading a bigger account, say $10,000.

Risk = 5% ($500)

Possible entry I was looking at 1.4372

Stop loss @ 1.4215 (157 pips)

Limit #1 @ 1.4750 (378 pips)

Limit #2 @ 1.5150 (778 pips)

So $500 risk with 157 pip stop allows for 3 lots ($1/pip)

Limit #1 would have exited out of 2 of the 3 lots. (378 pips X's $2 = $756)

Limit #1 bought the trade and then some.

Limit #1 = $756 profit (7.56%)

Limit #2 (if hit) = $778 profit (7.78%)

Total gain $1,534 Profit ( 15.34%)

I really like how that Limit #1 buys the whole trade and removes all risk. In fact Limit #1 was hit on the fourth day, so on a trade thats been going on for 17 days, only 4 days had any risk at all. If Limit #2 is not hit and the stop is hit then this trade would still profit 2.56% worst case. However on a big Daily 123 I think moving the stop to at least the #2 point is just common sense.