123 Patterns V1 uses ZigZag that comes with MT4. to know this use a lucid chart, add ZigZag solely, then head to any candle and appearance back in time. What area unit the last 3 points created by ZigZag? Label those points one two three. once value continues from purpose three to travel past purpose two then we’ve got an opportunity. Some individuals decision this 1-2-3-break. Ideally the move from purpose one to purpose two ought to be a lot of pips than the move from purpose two back to purpose three. In different words purpose three is somewhere within the middle between purpose one and a pair of. I say ‘ideal’ as a result of that alignment powerfully suggests that one to two may be an impulse move (with the trend) and a pair of to three is a retrace move (against the trend). This provides proof of trend direction.
I am about to begin straightforward and build up layer by layer. this can permit readers to ascertain the inspiration concepts that went into this indicator. within the last post I showed that one thing as straightforward as simply dropping ZigZag on the chart can offer you plenty of knowledge. i believe it’s vital to truly do this. Manually insert text labels one two three break on to a chart that has ZigZag solely. you may get an improved sorrow what the indi is making an attempt to try and do. Notice those places wherever patterns overlap or it’s exhausting to inform the distinction between optimistic and pessimistic patterns.
For a basic setup we tend to keep ZigZag on the chart and overlay 123Patterns v1 on prime. we alter the indicator settings turning off ShowAllLines ShowAllBreaks and ShowTargets. ZigZag had a default depth of twelve therefore we tend to set our indicator to a similar ZigZagDepth=12. currently we are able to see (on prime of ZigZag) the blue dots, red dots, and break arrows as below. we tend to even have 2 classes of 123 patterns. First, those patterns wherever three is ideally set in between one and a pair of. Second, those patterns wherever three is found on the far side one. Some would say this second class breaks the pattern and is thus not a sound 123 any longer.