On the attached EUR/NZD hourly chart, there is quite a bit of volatility. The 123 Trading System is a simple use of a zigzag pattern in pricing to enter the market. This allows traders to stay with the trend, and continue to pick up momentum in the market. The 123 of the system is in reference to 3 points on the chart. The 1 is the initial move, the 2 is the retracement, and the 3 is a confirmation of the initial move. This works in both up and down trends, and it gives you an opportunity to capitalize on a market that continues to move in a specific direction. Needless to say, this is a market that needs a trend to be effective. At the bottom left part of the chart, we had initially rallied from the 1.55 region to the 1.57 level, and then pulled back to the 1.56 level, and eventually broke to a fresh, new high. That’s essentially what we’re doing here: taking advantage of the momentum as an uptrend continues. There are several different ways to trade the strategy, simply entering on a confirmation of the 3, or waiting for another move like that and adding to your position and order to “pyramid” your size to make significant gains over the longer term. This works to the downside as well, essentially firing off a signal every time you make a fresh new low. As for targeting, to make the trade position worth your time, you should at least aim for the height of the pattern the got you involved.