The Ross Hook (RH) Trading Strategy

As you know, technical analysts rely on the past of the price to predict its future. Some traders try to prove that this way of trading is wrong and unprofitable. But we want to show you the Ross Hook pattern, which has proven to be profitable for 32 years.

Introduction

The Ross Hook (RH) trading strategy is a 100% price action strategy based on a retest of the breakout of the 1-2-3 pattern. If you haven’t read about the 1-2-3 reversal pattern, be sure to check it out first! Also, I must warn you, if you are new to trading, trying to find a Ross Hook pattern on your chart can be quite difficult at first. Because? Because you need to correctly identify the 1-2-3 pattern, and then wait for the Hook to appear. That may be confusing at first, but I’m sure you’ll be able to deal with it!

How to find a Hook?

I don’t want you to get confused here because the RH pattern is really useful, so I will explain everything in
the simplest way possible. Look at the ordinary 1-2-3 pattern, and then the Ross Hook.

Now, take a close look at the HR.

You see it? The Ross Hook is just a smaller 1-2-3 pattern that forms after the larger one! Now, all you need to do is find this “double 1-2-3 pattern” (that’s not the official name, but simplicity is the key).

Ross Hook Trading Strategy

To operate with the RH pattern, we must follow several steps:

1.Find a 1-2-3 pattern.
2.Wait for the violation candle to emerge (it is considered to occur at the breakout of point 2
of the 1-2-3 pattern).
3.Open the operation after the retest of point 2.
Look at the image to get it right. We have waited for the 1-2-3 pattern to emerge, then opened a trade after the retest and placed the Stop Loss (SL) below the retest level.

Now, let’s analyze a short trade:
We identified a pattern, waited for the Ross Hook to form and entered after the retest.

You can measure your Take Profit differently:

1.Measure the distance between point 1 and the RH and use it as your Take Profit.
2.Multiply the distance from the entry point to the top Loss by 2 or 3 and place your Take Profit here.
You can place several Take Profits and move your Stop Loss after the price reaches the first
aim. This way you will have fewer unprofitable operations
3.Do not set Take Profit. Instead, move your Stop Loss behind each high or low that forms as your trade moves. In a good trending market, this will allow you to follow the trend most of the way and capture many more profits.

Why Ross Hook?

First of all, I want to demonstrate the usefulness of the pattern. Analysts at the University of Oxford have tested this strategy on 42 different assets (including currency pairs, futures and stocks) over a 32-year period. Starting with $1 million and 1% risk per trade, the strategy has proven to be profitable. If you had traded this strategy, you would have made a net profit of more than $5 million.

In summary:

Pros:

1.It is based on price action. You don’t need anything more than a graph.
2.It has been tested over extended periods and has proven to be cost-effective for decades.
3.It has a good risk-reward ratio (up to 1:3 or even more, which is fantastic).
4.You can trade a 1-2-3 pattern while waiting for the HR to emerge.
Cons:

1.Entry points are not as frequent as in other strategies.
2.You must identify the 1-2-3 and RH patterns and filter out false price movements.
3.Nothing is perfect in trading, there will be false breakouts of the RH and your Stop Loss could be
affected.