thanks for sharing the 1-2-3 system. This method has been popularized by an infamous cowboy hat wearing system peddler. However, the system is a very valid method, and coupled with proper discipline and money management should work well.
I have been playing with 1-2-3 systems for a while and this is a general pattern I have noticed. After a 1-2-3 pattern forms and there is a breakout above/below #2 point, there is a tendency of the system to come back and retest the breakout area... just like a criminal visits the scene of crime again
Again, this is not always, but in my experience a good number of times, so that it can be a feasible trading strategy.
This is my suggested modification to the 1-2-3 strategy, and I would like the readers to comment on it.
After the 1-2-3 breakout, put in a limit entry order a few pips/ticks below the #2 point. If you are filled, then pursue the trade as a standard 1-2-3 trade. The advantage is that slippage is elliminated, and you can probably get a better fill. Also, for futures/stocks, you have a chance to use the volume filter. If the breakout was on above average volume, the breakout is more likely to succeed than breakouts on anemic volume, where probably the market makers are running the stops located above the #2 point. The disadvantage is that in some cases you will miss the runaway train. However, most trends always have pullbacks, and you can enter on a subsequent pullback.
Just another opinion, and your criticism/observations are most welcome.
Maji