14
2024/10
Trading Techniques Every Trader Should Master – The 123 Trading Rule
In the vast ocean of futures trading, the 123 Trading Rule is a widely used method that serves as a guiding light for traders, helping them identify trend reversals with clear stop-loss settings, making trading decisions more secure.
The 123 Trading Rule Explained:
“1” – Breaking the Trend Line:
- In an uptrend, when the price breaks the ascending trendline, it signals a potential trend reversal.
- In a downtrend, the trendline is broken when the price moves above the descending trendline.
“2” – Pullback Without Breaking the Previous High or Low:
- In an uptrend, after breaking the trendline, the price pulls back but fails to break the previous high.
- In a downtrend, the price rebounds but does not break the previous low.
“3” – Breaking the Previous Low or High:
- In an uptrend, the price falls and breaks below the previous low, signaling a potential downtrend.
- In a downtrend, the price rises and breaks above the previous high, indicating a possible uptrend.
Complementary Concept: 2B Principle
The 2B Principle acts as a reinforcement to the 123 Trading Rule. It suggests that when the price breaks the trendline and temporarily breaches the previous high or low but quickly returns below (or above) those levels, a trend reversal is highly likely.
Setting Stop-Losses in the 123 Trading Rule:
- In an uptrend, when the price breaks the previous low, traders can open a short position, placing the stop-loss slightly above the previous low to provide some buffer.
- In a downtrend, when the price breaks the previous high, traders can open a long position, with the stop-loss placed just below the previous high.
Stop-Loss in the 2B Principle:
- In an uptrend, when the price returns below the previous high, traders can open a short position, placing the stop-loss at the highest point.
- In a downtrend, when the price returns above the previous low, traders can go long, with the stop-loss set below the lowest point.
Conclusion:
The 123 Trading Rule, complemented by the 2B Principle, provides traders with an effective strategy for identifying potential trend reversals. Together, they offer a solid foundation for making well-informed trading decisions with clearly defined risk management through stop-loss settings.
Achieve Trading Success with WisunoFx
Success in trading is not just about skill and knowledge; it’s also about patience and discipline.
Experience excellence with Wisunofx, your premier destination for online trading solutions! With years of industry experience and a commitment to excellence, we deliver superior value to our clients, combining cutting-edge technology with personalized service to meet their unique trading needs.
Our platform offers a wide range of tradeable instruments, including currencies, commodities, and indices, with ultra-fast execution, competitive pricing, and deep liquidity, ensuring you can seize opportunities in the ever-changing financial markets.
At Wisunofx, we prioritize providing a secure and transparent trading environment with industry-leading encryption technology and strict regulatory compliance measures to safeguard your funds.
Start your journey toward trading success and join the thousands of clients who are already growing their wealth with confidence by opening a live account with WisunoFx today at:
>https://tw.wsncrmc.com/register/trader/multi-step
Note: Trading financial products involves high risks and may not be suitable for all investors. Please ensure you fully understand the risks and implement appropriate management measures.
