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Ross Hooks - Way to follow the trend
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Ross Hooks - Way to follow the trend

created Paweł Mosionek6 February 2019

Haki Rossa (Eng. Ross Hooks) is a technique developed by a certain Joe Ross. It is an interesting methodology for entering the market, aimed primarily at traders who adhere to the rule "Trend is your friend". The concept itself is used to identify potential market entry points when it is in trend. Consolidations do not create favorable conditions for playing here.

Ross Hooks - Determining the trend

Exactly this technique was described by Joe Ross in his book Fri "Trading the Ross Hook". Joe, as a trader, is based solely on technical analysis, and on this he also bases the methodology he developed.

Continuing the thought from the introduction, the first step we need to take is to correctly determine the trend. The time perspective is of no great importance here, although the higher the interval, the (theoretically) more reliable the signal of its change. A classic technique based on the recognition of higher highs and lows according to Dow Theory can be used to determine the direction. On its basis, the trend changes from downward to upward when sellers lose their "strength" and are unable to break a new low. The same is true for a downtrend.

ROSSA HOOKS strategy

Source: Platform JForex Dukascopy

Above, we can see the green part of the graph highlighted in green, where there is a change in the balance of forces. This is one of the few layouts on which Haka Ross's strategy is based. In the graph, after breaking the hole, you can see another attempt to attack the minima, which turns out to be ineffective. Formation here is 1-2-3, that is, the structure in the LL, LH, HL system, as in the diagram below.

structure 1 2 3

This is the first signal for us suggesting a possible change of direction. By analogy, it will look like a change in the downward trend (see diagram below).

1 2 3 formation

The formation of 1-2-3 takes place when the price is below / above one (1).

Ross Hooks - Formation Recognition

The 1-2-3 formation itself, after some familiarization with theory, is easy to catch in practice. However, we must remember to take into account only the time when the market is in a trend. Joe Ross in his book specifies exactly the conditions of the entire system that should be met, e.g. the number of candles that make up it, and for details, I encourage you to look at it.

Our next task, after determining the above-mentioned structure, is to find the Haka Ross formation. It is a candle breaking the 1-2-3 price pattern, which creates a new local high or low. After that, there should be a correction, which may consist of at least one candle with lower or higher prices: high and low. And it is this price formation that looks like a hook - Ross Hook - which has been marked with a green rectangle on the chart.

Haki Rossa formation    Haki Rossa formation 2

Transactions

Trading with the use of hooks in the simplest version assumes their regular striking by the price. Our task is to join the directional movement each time we knock. With a more conservative approach, we can stay in the first position not to increase our exposure.


Be sure to read: Pyramid in FX trading


We will most often use pending orders of the Stop type, secured Stop Losses set above or below the bottom / peak of the last correction. Along with the progressive movement, we add new orders, thanks to which a kind of pyramid / grid of positions is created, where only one pending order of the Stop type is active at a time. However, you should remember to modify the SL level for previously opened positions to the appropriate level.

ross hooks

Source: Platform JForex Dukascopy

When the traffic potential is exhausted, our next pending order will not be realized, and the closure of the entire grid will take place after the correction is recorded deeper than the last one (which increases the probability of a trend change).

Late reaction

The delayed capture of the 1-2-3 formation does not compromise the chance to occupy a position or start pyramiding. Ross's hooks are relatively frequent, even longer after reversing the tendencies, which allows us to stay in motion all the time.

The Buy Stop order (or, as a last resort, manual positioning), you can set several pips over the hook, which has been marked with a horizontal x line. With this strategy, Stop Loss for this job is set at the last local hole.

Summation

The strategy works well at every time frame, especially on instruments that are prone to a stable trend (with lower volatility). Note, however, that this is not a perfect method. A smaller interval (below H1) is a greater chance of false breaks. On the other hand, the increased volatility of the instrument is an increased risk of cutting our stop loss before the actual move. Moreover, the place of opening the position is not optimal - it increases the probability of continuing the movement in a given direction, but on the other hand delays it.

Nevertheless, Haki Rossa is a simple and effective base to build a much more advanced investment strategy that you should consider.

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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the ForexClub.pl website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.