The 2b rule and the 123 rule are indeed somewhat similar. But there is an essential difference between them. The 2b rule is a form in which the market cannot continue after the market hits a new low or new high, and then the trend reverses. The 123 rule is a reversal that occurs after the market fails to hit a new low or new high. To put it simply, the 2b rule can be regarded as a false breakthrough, that is, a way to lure retail investors to chase the rise and kill the fall, while the 123 rule is a form in which the market reverses without such a lure action. Let's look at the graphics separately.
From the picture above, we can see that there is a downward trend first, position 1 has broken through the red trend line, and position 2 has fallen, but it has not fallen below the lowest point before 1 , and then reversed, and even broke through the 1 position, so our entry position should be at 3. Here is one thing to remember: if the position of 3 does not break through 1, try not to trade, because before the breakout, this place is likely to become a volatile range. Of course, we can treat this form as a double bottom. On the contrary, in a rising market, if this happens, we can treat it as a double top. There are several extended graphics for the 123 rule, so I won't go into details here.
2B rule: The 2B rule is essentially a special form of the 123 rule, which is used to identify the reversal of the trend. In an uptrend, if the price has crossed or is very close to the previous high (low) price without continuing to rise, and the trend reverses later, the trend is likely to have changed.
In the definition of the 2B rule above, we can see the words "the price has crossed the previous high and low points and failed to continue". In fact, this is the biggest difference between the 2B rule and the 123 rule, which is what we said at the beginning The 123 rule does not break new lows (highs), and the 2B rule breaks new lows (highs). Look at the picture below:
In this picture, we still use 123 to represent. It can be seen that in the upward trend, the position of 1 is at the highest point, that is, the highest point in this wave of market. On the contrary, in a downtrend, the position of 1 is the lowest point. Here is the most significant difference between the 2B rule and the 123 rule. Another difference is that the position of 2 in the 2b rule is also different from the position of 2 in the 123 rule. In the 2B rule, the position of 2 is at the position of breaking the trend line, while in the rule of 123, the position of 2 is at the position of stepping back on the trend line, the only difference is this. In fact, the 2B rule can also be regarded as a double bottom or double top, but this kind of double bottom or double top is not very regular, but it is harmless to our transactions.
Whether it is the 2B rule or the 123 rule, they are all based on the Dow Theory. If you want to better understand this aspect, you can leave a comment below, or add me to chat. Thank you for watching, please move your fingers to make a fortune, click and follow!
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