How to Trade 1-2-3 Tops

How to Trade a 1-2-3- Top

Mike Reed is author of TradeStalker's RBI Trader's Updates.The 1-2-3 Top that you will read about below is oneof the many trade set ups that Mike has personally developedand uses in his own trading. Mike's support and resistancenumbers have been published on the internet since 1996. Hissupport and resistance zones are specific and incrediblyaccurate. He offers an unlimited free trial of his nightlyTradeStalker RBI Trader's Updates.http://www.TradeStalker.com

The 123 Top is a powerful setup in which the secondmove towards the top (or bottom) falls short of a double top(or bottom). The 123 Top is very close to the samepattern as the "second chance entry." However, it differsfrom the second chance entry by being the actual top orbottom of the day (to that point in the trading day, ofcourse).

In general, the 123 Top does not need a strong TICKextreme on the 3 position because the 3 pop-up is weakerthan the price pop at the 1 position. When the top at 1comes at (or near) fixed RBI support and/or resistance, itstrengthens the odds of the setup and makes a TICK extremeat 3 unnecessary. When a TICK extreme does register at the3 position, it helps with timing and increases the odds ofgetting at least a scalp profit.

A TICK extreme at 3 also allows you to anticipate theformation of the 123 top and get in early, before thedescending part of the pattern is formed after point 3.

If there is a huge TICK extreme at the 3 position, becautious about entering too early. There may be a secondpush upward.

When there's not a TICK extreme at point 3 of the 123 top,wait until the price curls over from the #3 position, orfalls fast and pulls back a little.

When you enter on a curl top from point 3 (or a pullbacktoward the second top as above) your "risk" (the money atrisk, not the odds on the trade) isn't as good as ananticipation entry that would get you short very near thetop at point 3 (because your hard stop is further from yourentry, risking more money on the setup).

On the other hand, entries on a "down curl from 3" or apullback toward 3 make the trade a higher-probability entrythan the anticipation entry.

If you take the curl entry (after point 3) and the marketjust sits there, get out immediately and take another look. Don't sit and hope, no matter how good you feel about thesetup. This will give you a fresh look without your capitalbeing on the line.

Time in the market equals risk exposure. Staying out of themarket when conditions aren't favorable is an important wayto reduce the overall risk of trading. If a setup patternre-establishes itself, then a second entry can be taken.

Here is a 123 Top that I captured live on audio/visual. I'm"walking" you through this set up as it develops:

http://www.tradestalker.com/123-top-2.avi

Please Note: If you have problems viewing the video (you canhear but can't see the video) , or get a message that says,"error downloading codec" , you may need to install a codecTSCC file FIRST, it's a free download and only takes about30 seconds. Here is the link:http://www.techsmith.com/download/codecs.asp

Click on the link "Download TSCC Codec". The first box thatpops up, click "run". Second box click "run" as well. (Itsounds hard, but it was really easy)

Once you're finished downloading the codec file, c'mon backto this email and click again on this link:

http://www.tradestalker.com/123-top-2.avi
(give it a couple of seconds to start playing)

If you'd like to have access to my entire arsonal of set-ups, you can find them in my ebook, "Read the Greed-Take theMoney" http://www.tradestalker.com/ebook.htm

Good Trading,Mike Reed
http://www.TradeStalker.com