This is a price action trading strategy called the Multi-Timeframe Trading with Trend line Trading Strategy and 123 Pattern. It is a strategy complimentary to the trend line trading strategy and to understand the concept of what we are about to show you here, you need to think in terms of multi-timeframe trading.

Multi-timeframe trading :

It simply means a combination of timeframes to watch for a setup and the actual trade will be placed in a smaller timeframe chart.

Now, the chart below shows a trend line trading strategy sell setup that would have fetched hundreds of profitable pips very easy.

But notice the timeframe, It’s in 4hr timeframe.

During that 4hr timeframe, what happened in the 15 minute timeframe or the 5 minute timeframe!

4 Hours Timeframe: 

15 Minute Timeframe :

5 Minute Timeframe :

sometimes if we are unsure if price will break the trend line and go up (or down), then using this trading technique will at least allow you to have a lot more confidence when the breakout happens at point  2 where you either sell or buy.

 Trading Rules :

• Watch a trend line trading setup happening in a larger timeframe, for example, 4hr, and then when price hits that trend line you switch to a much smaller timeframe to see if you can spot a 123 pattern
• Once you see the 123 pattern forming and if it’s a sell trade setup, you place your sell stop – 1-2 pips under the low of point 2.
• If it’s a buy trade, you place a buy stop order above the high of point 2.
• Your stop loss will be above/below point 1.
• Take profit target can be 3 times what you risked or using previous swing high (for buy order) or low (for sell order).

Pros :

• A solid price action strategy that stands the test of time.
• Good risk reward ratio and can make your hundreds of pips a month easily when the market conditions are perfect.
• Stop loss most times are placed at ideal locations ( below the support and resistance levels) making sure that you get less chance of being stopped out.
• Helps you from trading a false trend line trading setups with the addition of the 123 pattern.

Cons :

• Typically using 3 Different times frames can give a better perspective on the Market activity, but if a trader uses more than 3 different time frames then he may often get confused and not clarity.
• Some strategies may not be suited for multi time frame.