https://admiralmarkets.com/analytics/traders-blog/price-action-tricks-how-to-trade-1-2-3-patterns forget everything just trade this
it is not a indicator.... look closely.....it is just a breakout above the previous high or previous low. to trade you need risk and position management...also common sense will help as also may volume confirmation and momentum indicator confirmation
I've found 1-2-3 formations particularly helpful; they're the only "reversal trades" I ever take - all the rest of my trading is with-the-trend (and of course it's possible to trade 1-2-3 reversals only "with-the-longer-trend" for increased reliability, albeit at the cost of a reduced trading frequency). With care and experience, and careful money management, and patience and discipline, it's not terribly difficult to achieve a 70-75% win rate with these trades, using a 1:1 R:R and setting the stop loss just beyond the 2-point. I don't really accept, in principle, that "strategies work": I always think that "traders work" (or not), but given the care and experience, and careful money management, and patience and discipline, this is certainly a pretty good and reliable strategy, I must agree. It's based on something real. Please excuse my mentioning that that AdmiralMarkets "explanation" of them, above, really sucks, IMO. I'm not saying it's "all wrong" ... it's just confused and confusing and very badly written, IMO. For anyone interested, this link downloads a 24-page PDF on the same subject, by Mark Crisp (not breaching the author's copyright, here: the link is to a download from the "Trading Naked" site, which the author has allowed to share the PDF ... and it does advertise one of his own websites ... but it's also a clear, good, well-explained account of 1-2-3 formations).
The success or failure to make a higher high or lower low, I think that most of the shape-oriented drawings on charts such as wedges and whatnot are simply visual cues that are tied to this concept. The arrows on that chart make me think of the Elliott Wave method which may also be the same thing. Most of the candlestick patterns are also this same thing just represented through "pictures" and anecdotes.