1-2-3-Formations and Ross Hooks

[Sharky]

In case it hasn't been mentioned already, the '1-2-3 formation' is our current featured article on the Traderpedia.

 

[charliechan]

Thanks Charlie. Do you have any other tips for finding the good one Also does anyone have anything they have noticed that makes a good pattern stick out from a bad one. I have noticed that those 1-2-3 patterns that occur after a rally are more likely to work than those that come out of a trend that stair steps or looks cluttered? I also find that Phils target is remarkably accurate a lot of the time. That target being the length of the number 2.
Has anyone found that a number of bars or any other "pattern" can help to trade only good setups?

id refer to joe ross for that.

im no expert on these set ups, and dont really use them.

i would have thought that they would work better for intermediate move/trend reasserion rather than change in primary trend which tend to come from consolidations - prolonged periods of accumulation/distribution. this is just guess work on my part however.

all of these terms i use mean different things to different people. that could be the strength of the 123, in that it seems quite definite and concrete in its definition.

 

[trendie]

does this constitute a 1-2-3 ?
the number of bars between 1 and 2 appear excessive, but that could be due to the 10-min time-frame.

thanks

EDIT: what I mean to say is, would the breach of point 2, the black bar, be a valid 1-2-3 signal to go short ?

 

[charliechan]

id be going long!!

 

[frugi]

Trendie,

You certainly have the spirit of the pattern right.

However as you say there are too many bars between your 1 & 2 to consitute a strict Ross definition as I think he merely allows up to 3 bars between 1-2 & 2-3, though I will sometimes stretch this restriction to a few more.

Your marked 123 would probably be more suited to a slower timeframe, perhaps 30 minutes, as on this short time frame between 1& 2 there is a decent sized down trend rather than the tight topping formation leading into a trend reversal that we are looking for.

I've marked a couple of others and knowing nothing else would probably have taken the first one, 7 bars between #2 and #3 notwithstanding. Er ...

HTH a little.

 

[trendie]

thanks frugi for your reply.

yes - I am looking at larger time-frames as I have to contend with the 3-pip SB spread.
I didnt see the subtler 1-2-3, as it didnt "jump-out" at me.
I will practise (sp) more.

EDIT: I think the reason I went for the later one, was cos the 1-2-3 was formed from a lower-high, which reinforced the down-move, just in case the earlier one was a double-top about to go the upside.

 

[frugi]

In many parts of the English speaking world (UK, Ireland, Australia, Canada, and South Africa) “practice” is the noun, “practise” the verb. However, in the U.S.A the spelling “practice” is more often used for both the noun and the verb. Contrary to popular belief a significant minority of the American population also observe the distinction.

 

[trendie]

I have the same problem with licence / license
can never remember which is used when.

 

[neil]

Trendie

I have the same problem with licence / license
can never remember which is used when.

Licence, license. In British English the first is the only spelling for the noun while the second is the normal form for the verb in both countries. Thus, in Brit. Eng. "Motor vehicle licence, poetic licence; to license one's car, licensing hours. Hence also licensed premises, licensed restuarants (implying that they have a licence to serve alcholic drinks), and (now a rather old-fashioned word) licensed victuallers.
Extracted from "The New Fowlers Modern English Usage - Oxford"

 

[trendie]

what an incredibly tedious way to make 10 pips !!
entry= 111.52. exit = 111.39. ( 10 pips with allowance for 3 pip spread )

frugis entry at 111.77 ( as per explanatory post ) was much better - but dont know when he would have exited.

 

[ZDO]

OK I have been trading the 1-2-3 formations for a while. Not using the traders trick because on 30 min forex spot charts (sometimes 15 mins) it doesn't seem work. What I would like to know is if anyone has a filter for filtering out bad 1-2-3 formations or a way of trading only the best?
Interested in what someone said about counting number of bars in EACH LEG OF THE 1-2-3.
Anyway interested to hear any info that would help to avoid the 1-2-3's that fail. :cheesy:

By Ross's definition, a 123 is a formation at the beginning of a new trend and of course many other formations can begin a new trend. When a 123 does happen, the chances are small that it will be a 'pretty' 123.

What am I getting at? 'Pure' 123's are rare. I did some research in TS for 'classic' 123's (as defined in Ross's Law Of Charts) and not many showed up. The one's that did appear are good signals, because of the auction action that is underlying a 'pretty' 123 pattern. Basically, I think 'ugly' 123's with hesitations and congestion = games being played (double, triple, wedging, etc tops and bottoms) while 'pretty' 123's mean a preponderance of positions are being taken. My timeframe independent conclusions: The cleaner, the straighter, the closer to about a 60 deg. angle the 1 is - the better. The cleaner, the straighter the 2 is, and the fewer bars in 2 - the better! ie Quality varies inversely with the number of bars in a 123. The word for each new day when trading 123's is "patiense" ( :cheesy: ) .

I'm pretty sure Ross selects off a sample of instruments to find 'quality' 123's more than across a sample of timeframes within an instrument. Also, I'm pretty sure he doesn't enter a 123 to hold on for the whole new trend. I'm not sure how he's teaching position management these days but long ago he taught to take multiple positions and to start lifting them in parts almost immediately - ie he was happy with a few ticks on part of the position and enough cushion to get the remainder to a break even stop.

hth,

zdo

 

[sulong]

By Ross's definition, a 123 is a formation at the beginning of a new trend and of course many other formations can begin a new trend. When a 123 does happen, the chances are small that it will be a 'pretty' 123.


hth,

zdo

Actually, in the law of charts. JR explains about 123's occurring within congestion and trading ranges also. And suggest ways of handling them.
Sometimes the whole 123 thing gets too narrow minded in our interpretations of the law of charts.

 

[ZDO]

Actually, in the law of charts. JR explains about 123's occurring within congestion and trading ranges also. And suggest ways of handling them.
Sometimes the whole 123 thing gets too narrow minded in our interpretations of the law of charts.

OK. 123's are everywhere! I think the 123's you are referring to have more relevance to your The law of ledges, congestion, and trading ranges thread.

Ask Ross how often he actually trades the 123's being used to guide one out of a congestion. Imho (bcse it's been years), Ross teaches to wait for and select the quality ones - that's really all I was trying to say + give a little help on what constitutes quality in a 123.

 

[commander-keen]

OK. 123's are everywhere! I think the 123's you are referring to have more relevance to your The law of ledges, congestion, and trading ranges thread.

Ask Ross how often he actually trades the 123's being used to guide one out of a congestion. Imho (bcse it's been years), Ross teaches to wait for and select the quality ones - that's really all I was trying to say + give a little help on what constitutes quality in a 123.

Thanks ZDO I agree with you! After doing some backtesting 1-2-3's with a sharp reversal for all legs are good as are obvious looking ones with many bars in their formation. Plus I have found that many 1-2-3's that others would give up on because they are not triggered immediately can be triggered later and still reach their target.

Also my interpretation of Joe Ross is that if you don't have a 1,2 or 3 in 3 bars you have congestion. He did no say anything about each leg having a max 3 bars only that it needs to develope the next leg by 3. Many of Joe Ross's examples have many more. You will also find that a 1-2-3 that has 9 bars in each leg of a 5 min chart , has only 3 in a 15 min chart.

I should have mentioned I have read heaps on the 1-2-3 by various authors but am interested in any other techniques traders use to find them. Still waiting for something new

 

[trendie]

poss 1-2-3 on GBPUSD? a short triggered at 1.7414 if breached within next 20-30 minutes on 10-min bars ?

re: the square with question mark: if you reduce the time-frame, this could also be a 1-2-3 ?
( need to confirm, but sure 1 bar can be BOTH high and low, and thus valid )

 

[trendie]

conundrum.
depending on time-frame, I have 1-2-3 patterns pointing in different directions !!

the bigger timeframe 1-2-3 is a continuation 1-2-3, a breach of point 2 would be LONG.

however, the smaller timeframe a-b-c, is a reversal, a breach of point "b" would be SHORT.
( as a matter of record, I went SHORT at 1.3002, with a stop at 1.3027, risk of 25 )

 

[kwilo]

By Ross's definition, a 123 is a formation at the beginning of a new trend and of course many other formations can begin a new trend. When a 123 does happen, the chances are small that it will be a 'pretty' 123.

What am I getting at? 'Pure' 123's are rare. I did some research in TS for 'classic' 123's (as defined in Ross's Law Of Charts) and not many showed up. The one's that did appear are good signals, because of the auction action that is underlying a 'pretty' 123 pattern. Basically, I think 'ugly' 123's with hesitations and congestion = games being played (double, triple, wedging, etc tops and bottoms) while 'pretty' 123's mean a preponderance of positions are being taken. My timeframe independent conclusions: The cleaner, the straighter, the closer to about a 60 deg. angle the 1 is - the better. The cleaner, the straighter the 2 is, and the fewer bars in 2 - the better! ie Quality varies inversely with the number of bars in a 123. The word for each new day when trading 123's is "patiense" ( :cheesy: ) .

I'm pretty sure Ross selects off a sample of instruments to find 'quality' 123's more than across a sample of timeframes within an instrument. Also, I'm pretty sure he doesn't enter a 123 to hold on for the whole new trend. I'm not sure how he's teaching position management these days but long ago he taught to take multiple positions and to start lifting them in parts almost immediately - ie he was happy with a few ticks on part of the position and enough cushion to get the remainder to a break even stop.

hth,

zdo

Have you got any filters or confirmations as to which are the best of his hooks and gimme bars to trade?

 

[ZDO]

hooks

Have you got any filters or confirmations as to which are the best of his hooks and gimme bars to trade?

kwilo,

In my experience, the very best hooks to trade are those single bar hooks that follow a fast, strong 'externally influenced' (report, news, etc) bar. The 20+ tick continuation this morning (8/5) on the 15 min EUR/USD after the 'pause' / hook bar is a recent example. These don't necessarily have to be 'externally' driven - that's just when they most often happen. The pattern you're looking for is a high range bar that closes near it's extreme ( its low in this case) and then is followed by a small range (the smaller the better) bar that forms the hook (L[0] >= L[1]) and you stop in at the low or TTE.

The next best setup is a small range hook ( made of 1,2,max 3 bars) that follows a set of 2 - 5 'pretty' strong trend bars (best at the beginning of a trend). An example of this can be found on morning of 8/4 (same 15 min EUR/USD chart.) Three nice bars up, small range hook forms, and subsequent break out from hook on long side.

Some days hooks just keep on happening all morning long on the US indexes as price moves along the same (+-60 deg ?) angle. It goes a few bars, hooks, and goes a few bars and hooks over and over. I have no 'indicators' or 'forecasters' for these days. I just start taking them on 1 or 3 min. charts and keep taking them until after it's over.

In general what works for me is:
The larger the range of bar(s) previous to the bars creating the 'counter-directional' hook the better.
The larger the range of the bar(s) composing the actual hook, the less I like them.
The fewer bars before the break out the better. More than 3 bars in a hook and I start thinking congestion.
It should be noted, across the years I've been in contact with a lot of traders who seem quite comfortable with and maybe even prefer the exact opposite of these guidelines?!

Now - What do you mean by 'gimme bars'?
Am I'm completely out of touch with Ross techniques now?

Thanks,

zd

ps tried to get this out Fri but had internet connection issues

 

[Euro_d]

Finding them!

Hi all, super interesting thread.
Has anyone created an ELA (Tradestation 2000) strategy to fine these elusive but lucrative patterns. I find it difficult to find them manually! Difficult on EoD charts, impossible on realtime.
I want to use TS very soon to trade 123's intraday.
Trendie, I see you have created something on Updata which I used many years ago but gave up on them.
Thanks
Dave

 

[kwilo]

kwilo,

In my experience, the very best hooks to trade are those single bar hooks that follow a fast, strong 'externally influenced' (report, news, etc) bar. The 20+ tick continuation this morning (8/5) on the 15 min EUR/USD after the 'pause' / hook bar is a recent example. These don't necessarily have to be 'externally' driven - that's just when they most often happen. The pattern you're looking for is a high range bar that closes near it's extreme ( its low in this case) and then is followed by a small range (the smaller the better) bar that forms the hook (L[0] >=L[1]) and you stop in at the low or TTE.




zd

ps tried to get this out Fri but had internet connection issues

Thanks for your take on the hooks, ZDO, very enlightening.

The gimmee bars, which I believe Joe Ross advocates, are simply reversal bars which occur when prices touch the Bollinger bands. A full explanation can be obtained at the following site .........www.trading-naked.com/JoeRossGimmeeBarSetup.htm. I hope this link works but if not then just do a google search for gimmee bars and it should pop up.

Thanks again.