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The 1-2-3 pattern is a classic trend reversal price formation that occurs in all markets and can be observed in any time frame. It has stood the test of time thanks to its reliability, which is high compared to other chart price patterns. In fact, many trading strategies today are based on this chart pattern.

However, as with all price formations, the problem is learning to spot 1-2-3 patterns on the price charts, which is not easy for beginning traders due to their lack of experience. Also, most traders don’t want to spend their hours watching price charts. I think this is one of the main reasons why pattern-based strategies don’t work for many traders.

For that reason, we include a free custom indicator for Metatrader 4, which shows 1-2-3 bullish and bearish patterns on any price chart and in any time frame. This tool saves the trader a lot of time and works as they do not have to find the patterns on their own.

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Three Line Break charts were invented in Japan and are similar to Renko and Point & Figure charts. One trader from Japan described Three Line Break charts as a “more subtle form of Point & Figures charts, where reversals of price direction are decided by the market and not by arbitrary rules”. One of the most notable features of these charts is that they are time-blind and only change when closing prices move by a certain number of points higher or lower.

These charts show a series of vertical lines (or “blocks”) of varying size (Renko charts uses a fixed block size). Green blocks (traditionally white) represent rising prices, while red blocks (traditionally black) portraying falling prices. The blocks continue in the same direction until a price reversal is warranted.

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