A chart pattern is a distinct price formation that creates a trading signal, or a sign of anticipated price movements. Chartists use these patterns to identify current trends and reversals and to set buy and sell signals.
Among the different chart patterns, the 123 pattern is a considered to be an effective and successful pattern.
When the 123 pattern occurs at the end of a trend, it is a strong indication of a change in trend. Since price always moves in waves, this pattern can also be found within a trend and within a trading range.
But one must understand the advantages and drawbacks for any trading technique.
Implementing the technique in the live markets is the crucial part and one must have a trading plan defining the precise entry, stop and exit levels.
Learn how to identify this pattern and set the precise trading parameters of entry, exit and stop levels.