Ross Hook strategy uses price movements to foresee trends rather than using indicators. The “Hooks” was created on the 1-2-3 patterns of chart analysis. Ross took inspiration from this formation and brought forth his strategy, which is highly effective and is widely preferred by traders.
How to Use Ross Theory Practically?
In his book, Joe Ross explained the methods to use “Hooks” successfully in practice. In addition, he mentioned the following tips.
- The traders should observe the iron discipline to succeed.
- Every trader should keep the loss in mind.
- Traders should treat their work as a business by regularly weighing the expenses against the profit.
How to Fix Profits on Ross?
The author has advised dividing the position into three parts after opening and closing it.
- The first part shall close at the first opportunity, as soon as the accumulated profit allows the stop-loss to be blocked.
- For the second part, set a short term goal like a fixed profit to a loss ratio of 2:1.
- The third part is held as long as possible, usually until the reversal signal appears.
Understanding When and Where to Use Hooks
The best currency pairs in forex are the ones with the Japanese Yen. Most popular of them are EUR/JPY, USD/JPY, and GBP /JPY. They produce amazing trend movements even on small timeframes like M5 or M15.
The pattern has not yielded good results on the EUR/USD currency pair, so it’s better to avoid it. However, it is still very important that you backtest different currency pairs on variety of timeframes. You may need to customize your strategy based on several factors so that your winning odds remain in your favor.
Advantages and Disadvantages of Ross Hook’s Pattern
Hooks are bound to provide a stable income if you apply all the recommendations carefully.
The advantages are pretty evident. The market gives crystal clear signals derived from the traders’ psychology and work specifics of most participants. Once you join the trend ride, your chances of succeeding are good.
One of the disadvantages of this strategy is that it is quite complex to use, making it a bit difficult for beginners. One should gain experience by finding the pattern himself. Determine a favorable background and select suitable tools for the best possible results.
It is very important to determine the opening time accurately. The indicators make the task easy, but a lot depends upon the traders.
The trader himself is the central reason for success. But, unfortunately, the pattern gives a lot of false signals, so the traders must show discipline and manage funds smartly so that he may easily recover after failures. You can combine the method with any technical indicator to increase your winning rate or to avoid fake setups.