This pattern can also be a continuation pattern, but at the top or bottom of a trend this pattern provides a good confirmation of direction change.The "3" point is a failed retest of previous High or Low. The failure of the test signifies the change from a bull market to a Bear market and vise versa. The "3" point can also be referred to as a higher Low or Lower High.This pattern is very usefull for finding a trade entry.
123 Bottom
Definition:
The 123 bottom is the most common bullish reversal pattern. The requirements for the 123 bottom are rather common, causing the pattern to frequently appear in existing bearish trends. Many 123 bottoms reach the first two conditions, but never confirm. The 123 bottom, therefore, can be somewhat deceiving. That’s why it’s imperative that the pattern confirms before placing trades.
The 123 bottom starts when a Forex sharply reverses higher after an extended bearish trend. This sharp rebound is the first requirement of the pattern, or part 1. The second requirement is for the price to halt its rally attempt at short-term resistance, which is part 2 of the pattern. Part 3 of the pattern forms when the price stages another sharp rebound, but from a relatively higher level than in part 1. The 123 bottom confirms when the price breaks above short-term resistance as defined in part 2.
Definition:
The 123 bottom is the most common bullish reversal pattern. The requirements for the 123 bottom are rather common, causing the pattern to frequently appear in existing bearish trends. Many 123 bottoms reach the first two conditions, but never confirm. The 123 bottom, therefore, can be somewhat deceiving. That’s why it’s imperative that the pattern confirms before placing trades.
The 123 bottom starts when a Forex sharply reverses higher after an extended bearish trend. This sharp rebound is the first requirement of the pattern, or part 1. The second requirement is for the price to halt its rally attempt at short-term resistance, which is part 2 of the pattern. Part 3 of the pattern forms when the price stages another sharp rebound, but from a relatively higher level than in part 1. The 123 bottom confirms when the price breaks above short-term resistance as defined in part 2.
Nuance:
A basic definition of a bearish trend is lower lows. A basic definition of a bullish trend is higher lows. The 123 bottom seeks to identify when a pattern of lower lows ends and a new pattern of higher lows begins.
Another way to think of a 123 bottom is as a very short-term cup and handle, only the 123 bottom occurs at the end of a bearish trend.
The 123 bottom occurs in most bearish trends, but it rarely confirms. When it does confirm, it’s best to take a very short-term approach to trading the 123 bottom. Taking profits quickly is generally a good idea after entering a 123 bottom.
A basic definition of a bearish trend is lower lows. A basic definition of a bullish trend is higher lows. The 123 bottom seeks to identify when a pattern of lower lows ends and a new pattern of higher lows begins.
Another way to think of a 123 bottom is as a very short-term cup and handle, only the 123 bottom occurs at the end of a bearish trend.
The 123 bottom occurs in most bearish trends, but it rarely confirms. When it does confirm, it’s best to take a very short-term approach to trading the 123 bottom. Taking profits quickly is generally a good idea after entering a 123 bottom.
123 Top
Definition:
The 123 top is the most common bearish reversal pattern. The requirements for the 123 top are rather common, causing the pattern to frequently appear in existing bearish trends. Many 123 top reach the first two conditions, but never confirm. The 123 top, therefore, can be somewhat deceiving. That’s why it’s imperative that the pattern confirms before placing trades.
The 123 top starts when a price sharply pulls back after an extended bullish trend. This sharp reversal is the first requirement of the pattern, or part 1. The second requirement is for the price to rebound from short-term support, which is part 2 of the pattern. Part 3 of the pattern forms when the price stages another sharp pullback, but from a relatively lower level than in part 1. The 123 top confirms when the price breaks below short-term support as defined in part 2.
The 123 top starts when a price sharply pulls back after an extended bullish trend. This sharp reversal is the first requirement of the pattern, or part 1. The second requirement is for the price to rebound from short-term support, which is part 2 of the pattern. Part 3 of the pattern forms when the price stages another sharp pullback, but from a relatively lower level than in part 1. The 123 top confirms when the price breaks below short-term support as defined in part 2.
Nuance:
A basic definition of a bullish trend is higher highs. A basic definition of a bearish trend is lower highs. The 123 top seeks to identify when a pattern of higher highs ends and a new pattern of lower highs begins.
Another way to think of a 123 top is as a very short-term double distribution, only the 123 top occurs at the end of a bullish trend.
A basic definition of a bullish trend is higher highs. A basic definition of a bearish trend is lower highs. The 123 top seeks to identify when a pattern of higher highs ends and a new pattern of lower highs begins.
Another way to think of a 123 top is as a very short-term double distribution, only the 123 top occurs at the end of a bullish trend.
The 123 top occurs in most bullish trends, but it rarely confirms. When it does confirm, it’s best to take a very short-term approach to trading the 123 top. Taking profits quickly is generally a good idea after entering a 123 top. Aside from the nature of the pattern, it’s also a good idea to take profits quickly so as to mitigate the risks that bearish traders face in the form of the long-term upward trend in Forex prices.
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