Stop Guessing Tops! How to Trade the 123 Setup on the Mini Index

[00:02] to open your manual. I am Lis and I am Ricardo. And surely every trader has been through this. You see the chart, you see the market falling and oops, I found the bottom, I'm going to buy the market. Calm.

[00:15] elevator without a cable. Or the opposite, you sell thinking you've hit the top and suddenly the market goes up another 800 points and ends

[00:27] your existence. But what if there was a setup that was created specifically to solve this type of problem? A model that attempts to pinpoint exactly when the correction ends and the main trend

[00:41] returns. So today we're going to talk about Stormer's 1 2 3 setup, one of the and one of the best models for mini- index and swing trading. You'll understand the theory, the mathematical logic, the management, and then we'll

[00:58] go to the screen to show you in practice. Yes, and you practically don't have to do anything besides enjoy our channel, subscribe to it too, and leave a comment here if you're familiar with this type of setup. Go ahead, check out

[01:14] our Instagram and follow us there. They have some really cool tips there too. there. They have some really cool tips there too. And now for the video,

[01:28] come to us and ask if we have any platforms to recommend, whether it's a brokerage or an exchange. Well, we have some great news for you. The Trader's Manual now has a partnership with BEX, one of the 10 largest exchanges in the world.

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[02:28] easy. And the Bing X platform has a demo option. You can test all your setups there without having to spend real money. It's a virtual currency there that you use to test everything you need. So let's take it

[02:42] risk management is the most important part of trading. And if you don't want to trade alone, you have the option of copy trading, where you can automatically copy the best traders in the world. The interface is

[02:56] entirely in Portuguese and, on top of that, it's integrated with TradingView. And for those who don't know, Tradeview is the most widely used platform in the entire world. You can register using this link . In addition to having great

[03:09] benefits, it will help our channel grow. And if you click on that . There are several bonuses that you'll discover on the website page. Click there and claim your bonus. And speaking of bonuses, until July 30th

[03:22] And speaking of bonuses, until July 30th you'll get 0% of the FIP fee. For those of you who trade fairly frequently, you know that this fee isn't cheap, my friend. So, until July 30th, 0% fee. And if you want reliability,

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[03:52] know that BingX also cares about you. So, click here below and The 1 23 setup is a trend continuation pattern . This already sets them apart from that IFR2 setup. We even have a video about it up here, okay?

[04:07] The 1 2 3 setup, on the other hand, aims to trade in favor of the main trend; that is, if the market is rising, it looks for a small correction to looks for a small rebound so he can sell.

[04:21] He basically tries to fulfill every trader's dream: buy at the bottom of a correction and sell at the top of a rebound. But of course, without trying to guess. This is a very important detail. The 1 23 setup operates on an

[04:34] extremely important market principle. Healthy trends don't follow a straight line. This is something that every beginner trader takes a long time to understand. The market goes up, corrects, goes up again, corrects again, and goes up.

[04:47] And these corrections are precisely the necessary fuel for the 1 2 3 setup. after it has already moved a lot and when this correction seems to be catching its breath,

[04:59] it enters along with the resumption of the trend. So think of 23 as a trap. The market corrects, the most excited traders think the trend is over, and then the market resumes exactly in the

[05:12] original direction. The 1 23 setup typically works with a The 1 23 setup typically works with a hit rate of 55 to 62%. And many people look at it and think: "Wait, but I wanted greater effectiveness." But

[05:24] here we come to an extremely important detail: risk/return. important detail: risk/return. The 1 2 3 setup often delivers trades with a return twice the risk.

[05:36] So, even with a lot of trading errors, the model remains extremely profitable in the long run. This is something that not every trader understands. A professional trader won't aim to get everything right; they'll focus on a

[05:48] mathematical expectation or a proportion that makes sense. If you lose little when you're wrong and gain a lot when you're right, you don't need to have 90% effectiveness. Setup 1 2 3 is super simple in practice.

[06:03] He's very much into price action. What did we do here? Just trying to help out, right? Who is a beginner trader? And I put an exponential average of 20 here just to say that if the price is below the average, we only

[06:18] look to sell. If the price is above average, we're only looking to buy. If things are kind of sideways like this, we just grab a coffee and wait, because there's nothing else to do, we wait for the trend to change. So, what's the setup like? 1 2 3 I'll

[06:32] also put a candle counter here to help explain. So, candle counter here, OK? Insert. Awesome! Here it is in the mini-index, on the 15- minute chart. I think a slightly larger graph would be more interesting, okay? Or you could even

[06:45] use it for stocks on daily charts, okay? The 1 2 3 setup for sale, which is what we're looking for, right? The maximum of candle 2, candle 1, 2, 3, right? The high of candle 2 has to be higher than the high of the

[07:00] previous candle, right? From candle 1. So let's look here, see why it seems correct to have 1 and 3 here on this day. Candle 2 is bigger. Let's draw it here. Let's draw it here, shall we? The high of candle 2 is greater than the high of

[07:16] candle 1. The high of candle 3 must be less than the high of candle 2. And here it is precisely lower. So yes, this is where we configure our setup. 1 2 3.

[07:29] Ok? So let's recap. The high of candle 2, which is the most important to find, has to be higher than the high of candle 1; it has to be higher. the high of candle 1; it has to be higher. And the high of candle 3 has to be lower

[07:44] than the high of candle 2, okay? That's more than the high of candle 2. Now we're going to show, now we're going to put where the sell signal is, right? And where is going to put where the sell signal is, right? And where is our stop? The sell signal is then at the low

[07:59] of candle 3. I'll even make it a little thinner here. It enters at the low of candle 3, and our stop goes to the top, which is the overall high, right? This is where our stop signal comes in.

[08:14] we going to put our profit? Our profit is all the space between the Our profit is all the space between the low of candle 3 and the high of the last candle. So it ends up entirely in the region between the three candles. I'll put

[08:30] the Fibonacci projection here to make it easier. So, look, all this projection, it's going to hit 100% here, because it's it's going to hit 100% here, because it's 100% of this little piece here.

[08:43] And look, let's see how much that would be . Our stop loss would be at 1200 points, therefore our profit would be 1200 points. And here it happened beautifully and without any risk. So he stopped here. So, a 1 2 3 buy order

[08:57] stopped here. So, a 1 2 3 buy order works by forming a V. Look, a 1 2 3 sell order forms an A. You can see it here. It looks like an A. And 1 2 3 of purchase is a V. He has to make that sign. We saw that our previous stop loss had

[09:11] given us 1200 points in our game . And we've already seen here that a little V has formed . Look how beautiful! It formed a little V-shape here that's already our setup. Why doesn't 1 2 3 work here ? First, you just draw it; he made a V,

[09:24] right? Then it's already wrong. So you can see it a little more clearly, right? smart here. You see here, look, this minimum here, OK? It is below the previous low. So, here would be candle one, here candle two. However, this candle three,

[09:40] here candle two. However, this candle three, its low was below that of the last its low was below that of the last two, so it doesn't count as candles 1, 2, and 3. This one has to be above that to then make that little check mark. But the next one here worked out

[09:53] , yes. Oh, look, candle 2, which would be this one here, has a lower low than the previous low. And candle 3 here has a higher low than candle 2. Remember that even the sell candle cannot be lower than

[10:10] point. They have to be above us to make our V. With that, OK. Yes, it sets up a buy signal, but remember what I said, it

[10:22] 's below the 20-period moving average, so we would n't make the buy because it's below the 20-period moving average and therefore we would be entering against the trend. That's not the purpose of this setup. In this case, it worked . If you put the projection here,

[10:38] placing the low here with the high here, you'll see that further ahead profit, and made a very good profit up to this point . But we wouldn't do that . But we wouldn't do that because he's below the average of 20,

[10:52] OK? That's the only reason. And that's the intention of this setup, right? To go with pullback, a rebound, and continue going with the trend. The biggest mistake with the 1 2 3 setup is precisely operating in a

[11:06] sideways market, because without a trend the pattern loses a lot of its strength. Another common mistake is anticipating the entry. Many people see the candle 3 forming and get stopped out because the market hasn't yet confirmed the recovery. The 1 2 3 setup is

[11:22] extremely elegant and effective because it combines trend, price action, and price management. He doesn't try to predict the market, he difference. And now is the perfect time for you to

[11:37] comment below. Do you prefer reversal setups, such as the reversal setups, such as the RSI2, or do you prefer 2 3 setup? And while you're at it, subscribe to

[11:50] our channel, like our video, and if you enjoyed this video, you'll definitely like this next video that YouTube is recommending! that YouTube is recommending! Until next time.