I have not looked too closely at the 123 ross hooks - also known as an ABC, for a number of years, but I read most of his books back in the 90s. They were good, early price action ideas.
Two things we found
1) They work like anything in the right context. If you are in a trending market they are a great way to get into a trend. They also can be used to as a method for picking the end of pullbacks in a trend. (abc down in an uptrend is rather than a sell a good buy) (abc rallys in a downtrend became good sell areas)
You have to understand and have a preconceived idea of the context of the market..... this has always been the killer of many systems. We used them as a confirming contextual basis.
2) When a market is trending this is where they really come into their own. As a low risk way to enter, and then pyramid into a trend, you can really build up some big positions and let them ride. Not relevant if you close everything at the end of the day. But if you are prepared to pyramid, run things quickly to break even you can really build a position whereby every trade is going with the momentum. buy 3, sell 1, sell 1 run 1 - repeat. Dont use a trailing stop, and in a good trend its scary what you can make. Your exits are then your next worry.
Nothing really new, and other methods work, but the best thing about them is that they a flexible, and offer potentially good risk reward setups - when used sensibly.
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I agree, context is pretty important. ABC's are nothing new, but they are easily the most reliable indicator of direction I have seen. They are also easy to spot and I can't imagine entering the market in a safer way. If the context is right, an ABC will normally lead to a small enough move where you can get your stop to break even or small profits without risking too much.
Anyway, the point of these posts are to try to get traders to look at this method of entry. It will be more valuable than any indicator or candlestick pattern in my opinion. It is the biggest edge I have seen in the market so far.
The following user says Thank You to ziebarf for this post:
If have been looking at the Hooks for some time now. Has anybody else out there tried to use them as a swing indicator for a countermove, rougher than a breakout. Looking at end of day data, i like specially the day after a hook has formed. Since the traditional setup has high failure rate, one can nearly turn that around, by using the hook as short term counter trend.
Predicting an up or down day.
Always happy to compare notes on how everybody else is calculating their hooks.
I was wondering if any of you gifted NT scriptors have converted this indie to work with NT7? I have searched the forum, but I can't seem to find it. I for one would be very appreciative if one of you would convert this.