The 123 Patterns V7 forex indicator is a typical breakout Metatrader 4 indicator.
This technical indicator draws 2 colored breakout lines on the chart, a blue and red one.
The blue signal line is used to trade bullish breakouts while the red signal line is used to trade bearish breakouts.
In the upper left corner of the activity chart, the 123 Patterns V7 forex indicator displays the most current breakout signal, either “BUY” or “SELL”.
It’s recommended to use the 123 Patterns indicator together with a trend following indicator or an oscillator (RSI, MACD,..).
For instance, when the 123 Patterns forex indicator gives a breakout signal to the downside and the overall trend is down, it might be a good idea to trade the sell breakout.
Furthermore, the indicator also displays the current spread and ratio on the chart.
Free Download
Download the “123-forex-patterns.ex4” MT4 indicator
Indicator Chart (EUR/USD M5)
The EUR/USD 5-Minute chart below displays the 123 Patterns V7 Metatrader 4 Forex indicator in action.
Basic Trading Signals
Signals from the 123 Patterns V7 MT4 forex indicator are easy to interpret and go as follows:
Buy Signal: Open buy trade position when price closes above the blue breakout line and the overall trend is upward.
Sell Signal: Open sell trade position when price closes below the red breakout line and the overall trend is downward.
Trade Exit: Use your own method of trade exit.
123 Patterns V7 Indicator + Flat Trend RSI Forex Breakout Scalping Strategy
This MT4 breakout strategy pairs the 123 Patterns V7 indicator with the Flat Trend RSI indicator.
The 123 Patterns V7 draws a blue breakout line for bullish breakouts and a red breakout line for bearish breakouts.
Flat Trend RSI confirms direction with a blue histogram for buys and a red histogram for sells.
Use this method on M1 and M5 where quick breakouts and momentum moves occur.
Buy Entry Rules
- Flat Trend RSI histogram must be blue, indicating a bullish trend.
- Price must close above the blue breakout line drawn by 123 Patterns V7.
- Enter a buy at the open of the next candle after the breakout close.
- Stop loss: a few pips below the breakout line or recent swing low. Typical SL: 5 to 10 pips on M1, 8 to 15 pips on M5.
- Take profit: 10 to 25 pips on M1, 15 to 30 pips on M5, or trail the stop if momentum continues.
Sell Entry Rules
- Flat Trend RSI histogram must be red, indicating a bearish trend.
- Price must close below the red breakout line drawn by 123 Patterns V7.
- Enter a sell at the open of the next candle after the breakout close.
- Stop loss: a few pips above the breakout line or recent swing high. Typical SL: 5 to 10 pips on M1, 8 to 15 pips on M5.
- Take profit: 10 to 25 pips on M1, 15 to 30 pips on M5, or trail the stop if momentum holds.
Advantages
- Confirmation from Flat Trend RSI reduces false breakouts and improves signal quality.
- The 123 Patterns V7 breakout lines mark clear trigger points for entries.
- Rules are simple and repeatable, which helps during fast market conditions.
- Suitable for lower timeframes with tight stop loss and clear targets.
- Works best on major pairs that offer low spread and steady liquidity.
Drawbacks
- Breakouts can fail and stop you out before momentum resumes.
- The method needs quick execution and discipline to follow strict sizing and exits.
Case Study 1 (M1 Buy Breakout)
On EURUSD M1 during the London session, the Flat Trend RSI turned blue.
Price closed above the 123 Patterns V7 blue breakout line at 1.11025.
Enter buy at 1.11030. Stop loss was set at 1.11015, about 8 pips risk.
Price climbed to 1.11055 within two minutes and the trade closed for +12 pips.
Case Study 2 (M5 Sell Breakout)
On GBPUSD M5 during the New York session, the Flat Trend RSI histogram turned red.
Price closed below the 123 Patterns V7 red breakout line at 1.32580.
Enter sell at 1.32575. Stop loss was set at 1.32595, about 10 pips risk.
Price dropped to 1.32390 over the next 27 minutes and the trade closed for +18 pips.
The bearish trend held until the target was reached.
Strategy Tips
- Focus on clean chart conditions where price is not stuck between support and resistance levels. Breakouts work best when the market has room to move.
- Avoid entering trades if the breakout candle is unusually large because it often reduces the reward to risk ratio.
- Use a small trailing stop once price moves at least halfway to your profit target. This protects gains without cutting the move too early.
- If the Flat Trend RSI color flips back shortly after entry, consider closing early because momentum has weakened.
- Track the average breakout range of your pair. Some pairs offer consistent 10 to 15 pip bursts, while others move slower.
- Keep your chart free of unnecessary tools. Faster visual decisions improve reaction time on lower timeframes.
- Check spreads during off-hours and avoid trading when spreads widen because it reduces your net profit on scalps.
- If multiple breakouts occur in a tight zone, skip them. Consolidation after repeated failed attempts usually produces choppy results.
- Always log your trades. After 20 to 30 trades you will see which pairs and times of day give you the best breakout performance.
Download Now
Download the “123-forex-patterns.ex4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: Chart pattern indicator
Customization options: Variable (ShowBears, ShowBulls, ShowDots) Colors, width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: Breakout
