The staff at FXTimes.com outlines the elements of a 1-2-3 pattern for the benefit of all traders just starting out. As the staff illustrates, this is a very simple pattern that always give lots of opportunity, and once a trader grasps the fundamental basics and practices, he will see them all over the place.
Good question. A 1-2-3 is simply best explained by looking at some charts. It’s really simple when I throw up a few charts and take it from there. Here are some stock charts.
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Above is simply a daily bar chart of the stock of the big blue chip US stock General Electric. Stock symbol GE [taken from one of forex forums]. Clearly marked is the 1-2-3 pattern that evolved in February. Simply put, it is a 1-2-3 buy pattern.
It’s a bottom, a correction, a retest that does not go beyond the original bottom, and then a rebound beyond the correction. Phew…that was a mouthful. But it is very simple when you look at the chart.
- Point 1: This is the bottom.
- Point 2: This is the correction
- Point 3: This is the retest the does not go beyond point 1. If it does then all bets are off. The pattern does not exist. Scratch it off and move on.
Once you have a valid 1-2-3 pattern then place your buy order in at the breakout of the number two point on the pattern.
Honestly, it is a very simple pattern that always give lots of opportunity and a great risk:reward ratio. Once you grasp the fundamental basics and practice, you will see them all over the place.
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By the Staff at FXTimes.com
