Joe Ross Hooks: Understanding an Unusual Strategy

Hello, fellow forex traders!

Today we will get acquainted with an original and unusual strategy developed more than half a century ago by the famous trader Joe Ross. As you have probably already guessed, this article will discuss Ross hooks.

Let us say frankly, this trading system has already been somewhat forgotten by many traders and is not used by them so often. However, by trading it, you can make a profit in the financial markets. How to do this in the 21st century – we will now explain.

In the professional environment of forex trading there are two approaches to forecasting the rates of currency pairs: analysis of price flow using technical indicators or the use of Price Action (PA). 

PA – is the forecasting of trends in the movements of quotes; the method is popular because of the absence of lag and a broader, more informative view of the future movement. Patterns and chart analysis make it possible to determine in advance the zones of take-profit, reversal points, or correction.

If indicators work according to certain formulas hidden from view for the complex calculation of a signal, receiving data from past historical periods, then candlestick analysis figures are formed "here and now," rarely using a "deep dive."

The popularity of Price Action has given rise to many strategies with which the Internet is flooded, but one of them has been undeservedly forgotten. This is Joe Ross's hook – an author's strategy developed 60 years ago.

Most interestingly, its author still teaches the art of trading on the Tradingeducators educational portal, and no one even remembers what he looked like in his youth anymore. Joe Ross came to the exchange in 1957, and the hook trading strategy became one of the first to bring him real profit back in 1959.

It was tested and improved for more than 20 years, revealing its potential with the emergence of the futures market in 1982. Later, Joe Ross devoted a separate book to this strategy – "Trading The Ross Hook".

The 1-2-3 pattern became the first Price action figure that the young student Joe Ross noticed in 1957. Even then he began trading it, repeating exactly the trading strategy described in the article on our website.

Continuing his education, Ross mastered many trading systems, but the novice trader continued to improve his own discovery. He quickly enough realized that the discovered hook pattern works only under the following conditions:

It was precisely the search for and confirmation of a trend that made the trader "go further" than the price movement within the 1-2-3 figure. The hook, denoted by the author with the letters Rh on the chart (Ross Hook), made it possible to reliably confirm the pattern, and its breakout – the presence and strength of the trend.

Another advantage of the hook discovered by Joe Ross was its repeatability: the 1-2-3 pattern often created a stable and prolonged new trend. Each peak or trough became the next hook, which Ross used for entry, building a "pyramid of orders."

To determine the end of the directional movement, Joe Ross used the reverse hook RRh, relying on the opposite Rh minimum or maximum of the chart. The breakout of the nearest RRh became a signal to close all positions and search for a new 1-2-3 formation in the opposite direction.

To determine the end of a directional move, Joe Ross used a reverse hook RRh, based on the opposite Rh low or high of the chart. A breakout of the nearest RRh became a signal to close all positions and search for a new 1-2-3 formation in the opposite direction.

Platform: any
Currency pairs: any
Timeframe: M5 – D1
Trading time: intraday, on timeframes below H1 - only European and American sessions
Recommended brokers: Alpari, RoboForex, TickMill

Rh is defined as each new local maximum formed after the 1-2-3 pattern of an uptrend, or the first and subsequent local minima after the pattern in a downtrend.

An additional rule is the presence of a trend during the formation of the 1-2-3 pattern; the highs and lows set at these points must be "broken" during the formation of 4 candles.

If after this the fourth candle does not go beyond point 2, the formation is cancelled, that is, we wait for a new minimum point 3, a breakout of 2, and the formation of the next hook.

If after this the fourth candle does not go beyond point 2, the formation is canceled, i.e. We are waiting for a new minimum point 3, a breakdown of 2 and the formation of another hook.

Rules for entering sells

To enter a short, we place a pending Sell Stop order at the level of the Rh minimum.

Rules for entering sales

There is no Take-profit in the classical theory; the trader is guided by the rule of trend presence until RRh is broken.

The Fibonacci indicator can provide take-profit levels if you draw a trend line from Rh to point 1 of the 1-2-3 pattern.

Take profitthere is no theory in the classics,traderis guided by the rule of the presence of a trend until RRh is broken.

On the 4-hour NZDUSD chart, a reversal 1-2-3 pattern formed, appearing at the bottom of a downward movement. The condition of a preceding trend with three hooks is met; there are four of them in the picture.

After the first hook, we begin counting the correction candles; the minimum was set already on the first candle, and it took exactly 4 candles to form the reverse hook – the trend condition is met.

As can be seen from the figure, there was no prolonged trend – having formed the next hook, the bulls do not have enough strength to break it. The previously opened trades are closed by stops: one becomes a take-profit, the second brings a loss.

After the first hook, we begin to count correction candles, the minimum is already set on the first candle, it took exactly 4 candles to form a reverse hook–the trend condition is met.

Joe Ross described a fairly large number of conditions and nuances of working with hooks, which can confuse more than help a beginner trader, but experienced currency speculators will not discover anything new for themselves in the author's observations.

An example is filtering by oscillators – indicators that indicate overbought and oversold zones. Logically, it is clear that at such points there is a high probability of a false breakout of Rh, and the trade will fail.

The coincidence of the levels for placing Buy/Sell Stop orders with strong resistance and support lines or with the extremes of the week, month, or year is also a reason to cancel the trade, as is a gap, but in the Forex market, price gaps are an infrequent phenomenon.

An example would be filtering byoscillators–indicators, indicating overbought and oversold zones. It is logically clear that at such points there is a high probability of a false breakout of Rh, and the trade will fail.

The "Joe Ross Hooks" strategy was forgotten due to the popularity of the 1-2-3 pattern. When comparing both tactics, the obvious lag of the Rh signal is evident – it is at this point that traders take profit. In itself, the hook is an excellent way to confirm and see the 1-2-3 formation, so the strategy will suit novice speculators.

A trader can learn to identify the pattern without error after fairly long training and work with Ross's "hooks," which will allow him to move on to earlier entries. Professional participants in the currency market can adopt Ross hooks for additional signals for entry with a pyramid of trades or a "positive Martingale."

Sincerely, Ivan Petrov
Tlap.io

A trader can learn to accurately identify a pattern after sufficiently long training and working on Ross’s “hooks,” which will allow him to switch to earlier entries. Professional participants in the foreign exchange market can use Ross hooks for additional signals to enter pyramid transactions or “positiveMartingale».

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Best regards, Ivan Petrov
Tlap.io