The 123 pattern is a reversal chart pattern which occurs very frequently and has a very high success ratio. 123 s occur at the end of trends and swings, and they are an indication of a change in trend. They can sunil mangwani harmonic patterns forex be found within a trading range, and they take place when the directional momentum of sunil mangwani forex trend is diminishing.
In the above illustrated example, we have a typical 123 formation forming at the end of a downtrend. Once this pattern has been spotted, let us define some very simple rules for managing the trade. The stops to be placed beneath the low of point 1. Aggressive traders may even place the stops below the point 3, but it is always better to give price enough room to move without hitting the stops.
In this example we can see that price was initially in an uptrend. In this new downtrend, we then have a swing low from where price retraces up again in the direction of the previous uptrend. Trend line entry An aggressive entry can be taken on the break of a trend line plotted from the point 2 to 3. While the profit objectives and the stop levels remain the same, one must apply money management rules to this type of trades, and take partial profits at the initial levels. GBPUSD Weakening But For How Long?
What do these have in common with the financial markets? In the early 1200’s, an Italian mathematician Leonardo Pisano Fibonacci uncovered a secret about this ancient civilization that would revolutionize the entire mathematical world including the financial markets! While studying the Great Pyramid in Egypt, Fibonacci made a startling discovery and uncovered a unique mathematical sequence of numbers that changed several theories of trigonometry, algebra and geometry. He developed the famous Fibonacci sequence of numbers, which simply says that the third number is effectively the sum of previous two numbers: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on. But the real value lies in the fact that the ratio of any number to the next higher number is approximately 0. 618, and the lower number is 1.
The key Fibonacci ratio of 61. These ratios developed by Fibonacci actually go back thousands of years to the time of the Egyptians and the Greeks. Golden Mean’ in architecture and music. Subsequently, these ratios have become the foundation of many effective trading systems, but the truth is they are seldom used properly. And ironically, though it is one of the most effective tools of technical analysis, it is also the most misunderstood. These Fibonacci ratios can accurately anticipate when the market makes a major turn and identify key turning points for tops and bottoms only if you know how to read them correctly. If you can learn to use them correctly, you can increase the probability of profitable trades and minimize potential losses.