The exception to the rule about 3 bars concerns double and triple highs (double and triple lows). In the case of a triple high (low) the three bars count as only one correcting bar.
• Once a Ross hook is in place, we want to buy a violation of the high of any of the correcting bars that form subsequent to the point of the hook (Rh).
Correcting bars are the bars subsequent to the Rh point and are correcting as long as they make lower highs.
The following provision applies:
1.There must be sufficient room between our entry price and the Rh point for us to be able to cover costs and take at least some profit.
By insisting that there be enough room to cover costs and take some profit we accomplish two things:
a. We get paid to trade.
b. If the breakout proves to be false we will still have had a winning trade and a free trade as well.
The area between the first dashed line and the Rh point must allowenough room to cover costs and take a profit. If not, then the TTE may occur on any of the two subsequent price bars, if there are any subsequent bars.
By covering costs and taking a profit prior to prices reaching Rh, we in effect get a free trade. If prices go on well beyond Rh, we make a very profitable trade. This assumes trading at least two contracts.
The following provision applies:
2.The Rh formation must occur subsequent to the violation of the #2 point of a 1-2-3 formation, a Consolidation, or a Ledge.
A violation of the #2 point of a 1-2-3 low (high) defines a trend. A subsequent violation of an Rh establishes a trend.
A violation of a Ledge re-defines a trend, since a Ledge can occur only in an existing trend. A subsequent violation of an Rh reestablishes a trend.
A violation of Consolidation defines a trend. A subsequent violation of an Rh establishes a trend.
The following provision applies:
3.With only one exception, there cannot be more than 3 bars of correction prior to prices moving toward the Rh point.
A violation of the high of the first bar of correction gives the greatest percentage chance of the move continuing beyond the Rh point, but has the least likelihood of having room to cover costs and take a profit.
A violation of the high of the second bar of correction gives a lower percentage chance of the move continuing beyond the Rh point, but has a greater likelihood of having room to cover costs and take a profit.
A violation of the high of the third bar ofcorrection gives thelowest percentagechance of the move continuing beyond the Rh point, but has the greatest likelihood of having room to cover costs and take a profit.
Next : Traders Trick Entry Part 3
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