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1-2-3 – The Foundation of Potential Change in Trend

By Lawrence  

Part of Art of Chart Reading

Summary

If there is only one chart pattern you are allowed to learn, 1-2-3 is the one.

1-2-3 is often a reversal pattern that marks the termination of a trend. The pattern is made up of 3 swings where the first and third swings are pointing to the opposite direction of the current trend. Once the third leg has exceeded the first one the setup is triggered in the direction they are pointing to. If the 1-2-3 setup happens at important support/resistance price level, it often signals a major reversal, or at least a more significant pullback in the making.


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Comments
  • geosing March 17, 2012 at 10:55 pm

    Golden. Thank you.

  • donaldt44 March 19, 2012 at 11:51 am

    notice u have done examples in 5 min charts, have you looking at volume charts(2500 n 5000 volume) ? pattern seems more clear on them than time based chart.

    • Lawrence Chan March 19, 2012 at 3:12 pm

      All the basic chart patterns work well on ntick charts.

      For very busy instruments like ES, patterns on ntick charts are cleaner.

  • ultramarine March 19, 2012 at 1:44 pm

    I’ll second the comment of geosing.

  • Jeffreyvnlk October 21, 2017 at 4:11 am

    I the third..

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