We need a good forex trading system to get a good results, and we should make a simple trading strategy so it can use consistently by its user. From my research I found a simple trading system and easy to use. This system is widely discussed in forex trading forums in the web and this could be inspiration resource to make a trading system which match with traders characteristic.
This trading strategy use 123 technique, this technique is like wave count method to predict market trend direction. This trading system is used to determine trend reversal possibility.
123 trading system
How to define 1, 2, and 3 trading ?
1 is made when the market is in trending move and start retrace, 2 is the edge of retracement level, 3 is when the market already reached 61,8% fibonacci retracement level from point 1 and 2, but still below point 1.
Our entry level is when market price trough point 2 and our stop loss is at below point 3 (long position) or above point 3 (short position). Or if the market price is in active market, we can set our stop loss at below or above point 1. And the different between point 2 and point 3 can we use for our profit target. It is easy right ? We don't have to use any technical indicators at all.
Trading 123 example, 15 minutes chart GBPUSD on 13 december 2010, market price was at 1.5793 and then the market price was moving down at 1.5718. This level was point 1. The point 2 was at 1.5765 where the market corrected. And then we used fibonacci tool to measured the possibility of the point 3. With retracement measurement we have got that 61.8% is in point 1 and point 2, and we got point 3 around 1.5736. In the trading chart the market price is over that level but they did not exceed point 1. Point 3 was valid.
After we decided point 123, we wait the market price go trough above the point 2, and we used this level as open buy trading signal and stop loss level is couple pips below point 3 or below point 1. The profit target was the different between point 2 and point 3.
We can use 2 lots for our transaction. First lot was out if the profit target level reached. And then we moved our first stop loss level at second stop loss, with this money management system we can free of trading risk. Our secondary trade is moved at secondary stop loss. This trading system is compatible in high volatility market price, and it means Euro and America trading session.
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