The 123-chart pattern is a three-wave formation, where every move reaches a pivot point.
Day trading naturally attracts the attention of people who start trading on financial markets. In the modern world, trading is possible for most people interested in trading. However, the term so-called "Big players". Who are these big players? Contrary to some opinions, they have nothing to do with international freemasonry and cyclists. The so-called "Big players" are institutional market participants who have enough capital to be able to create trends.
The 1-2-3 pattern is a reversing price pattern. It occurs in both an upward and downward trend. In an uptrend, it is about setting a lower high and a lower low. Similarly, in a downtrend, it clears when a higher low and a higher peak are marked.
The high effectiveness of this pattern is due to the fact that buyers as well as sellers position themselves in terms of further market behavior. Where the number "2" is marked, buyers see an opportunity to go long. However, they fail to break the new high, which is necessary in an uptrend. At the moment when point 2 is struck, there is a continuation of the downward movement. The situation is similar in the case of a change in the downtrend into an upward trend.
Tools used in a strategy using the 1-2-3 pattern
The strategy uses classic trend analysis, with local highs and lows marked. According to Dow's theory and classical technical analysis, an uptrend is when the price records higher and higher highs and lows. Likewise, a bearish sentiment occurs when the price traces lower and lower highs and lows. Therefore, a trader using this approach should first of all determine the trend that currently prevails on a given value. This will make it easier for him to tag correctly. Then, use the chart to identify when the 1-2-3 pattern is forming. This is a day trading strategy, so you should focus on trading that can be used in a shorter time frame. It would be best to use the charts below H4 so you can react faster to the formation that is forming. For obvious reasons, it is worth remembering that the sooner we observe a given pattern, the greater the probability of success in day trading.