Last updated: May 8, 2025

ABC and 123 Forex Chart Patterns Strategy

The 123 pattern is a reversal chart pattern which occurs very frequently and has a very high success ratio.
This pattern can be found at the end of trends and swings. This can also indicate a change of trend. You can also found this pattern in a trading range.
They take place when the directional momentum of a trend is diminishing.

Forex Indicators:

• The Turthe Channel Trading;
• Show 123 V.2 indicatorS fetures:
• Up color = green
• down color= Red
• Failed up color= lime
• Failed down color= orange
• Fib piv 2 (only for time frame h1);

Trade only in direction of the Turtle Trend Channel

1. Buy on the break of the point 2
2. Sell on the break of the point 2

Time Frame 1 hour,  Exit on the fibo pivot 2

Working of the pattern:

• An indication of the change in trend is seen, when price retraces the original down move.
• Failure to make a new low.
• Price rallying again from here, creating an anticipation of a reversal.
• Breach of the previous high, confirming the reversal.

Trading rules:

Entry:

• It would be best to enter a trade during the break of point 2 – the previous high (or low as the case maybe).

Stop:

• Place stop loss at the low of point 1. Those who are aggressive put their stops at point 3. Give the price a room to move without hitting the stops.

Price targets:

• To take profit, you must use a measure move concept because this pattern don’t have any specific target. To do this, you must calculate the distance from point 1 to point 2 in the formation.
  Add this to the low of point 3, and this should be the minimum distance that price will travel to.

Some practical points:

The setup of the entire pattern from point 1 to 3 could take place in 3 bars or as long as 20 bars. But the rules of pattern remain the same.

A point to keep in mind here is that the more the number of bars involved in the setup, bigger should be the move. This is not a fixed rule, but more often not, this concept is followed by the price.

Allow the pattern to prove itself before entering a trade. If point 3 forms below point 1, the pattern is negated.

Similarly price has to break the high of point 2 for confirmation.

There will be times when price will consolidate within the area of points 2 & 3, without giving any indications of the direction. At such times it is better to stay out, till price action confirms a direction.
Target zone.
Target Zones:

• The measured move concept.
• Fibonacci Expansions.

Fibonacci ratios

Fibonacci ratios are a very popular tool among technical traders and are based on a particular series of numbers identified by mathematician Leonardo Fibonacci in the thirteenth century.

The Fibonacci sequence of numbers is as follows:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.

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