GoldBoy

The 1-2-3 strategy is a price action and trend reversal technique. The setup involves identifying a point 1 (main maximum/minimum), a point 2 (retracement), and a point 3 (minimum/minimum lower than point 1). Entry occurs at the break of point 2, with stop loss beyond point 3.

How to Identify the Pattern

The formation identifies a reversal of the trend from bullish to bearish (pattern 1-2-3 High) or from bearish to bullish (pattern 1-2-3 Low):Point 1: It is the initial high or low of the downtrend.Point 2: The price reverses direction creating a low (in an uptrend) or a high (in a downtrend).Point 3: The price retraces again, but stops before passing Point 1.

Operating Rules

To operate effectively on currency pairs (such as EUR/USD or GBP/USD), the correct application follows precise levels: Entry (Breakout): Place a buy (Long) order if the price breaks Point 2 upwards (in the 1-2-3 Low pattern), or sell (Short) order if it breaks Point 2 downwards. Stop Loss: It is placed beyond Point 3, so as to exit the trade if the formation is invalidated by the market. Take Profit: The amplitude in pips between Point 2 and Point 3 is measured and this distance is projected from the break level (Point 2).