by Mark Mc Rae of SureFire-Forex-Trading.com
Forex 1-2-3 Method
This particular technique has been around for a long time
and I first saw it used in the futures market. Since then
I have seen traders using it on just about every market
and when applied well, can give amazingly accurate entry
Lets first start with the basic concept. During the course
of any trend, either up or down, the market will form little
peaks and valleys.
The problem is, how do you know when to enter the market
and where do you get out. This is where the 1-2-3 method
Nice and simple, but it still doesn't tell us if we should
take the trade. For this we add an indictor. You could use
just about any indictor with this method but my preferred
indictor is MACD with the standard settings of 12,26,9.
Now here is where it gets interesting. The rules for the
trade are as follows:
- This works best as a reversal pattern so identify a
- Wait for the MACD to signal a buy and for the 1-2-3
set up to
be in place.
- As the market pulls back to point 3, the MACD should
buy mode or just slightly dip into sell.
- Place a buy entry order 1 pip above point 2
- Place a stop loss order 1 pip below point 3
- Measure the distance between point 2 and 3 and project
forward for your exit.
- Point 2, should not be lower than point 1
The reverse is true for short trades. As the market progresses
you can trail your stop to 1 pip below the most recent
low (Valley in an uptrend).You can also use a break in
a trend line as an exit.
There are a lot of variations on the 1-2-3 setup but the
basic concept is always the same. Try experimenting with
it on your favorite time frame.