Understanding the 1-2-3 Reversal Pattern and Ross Hook Pattern: Proven Profitable Trading Strategies

Although not widely known among traders, the 1-2-3 Reversal Pattern and Ross Hook Pattern boast high accuracy levels in chart analysis. Despite being considered riskier compared to trend trading, trend reversal methods often become an attractive choice for some traders. Why is that? Because the market won't always move in one direction, and reversal strategies can provide profitable opportunities.

Basics of the 1-2-3 Reversal Pattern

Before grasping the Ross Hook Pattern, it's crucial to master the basic concept of the 1-2-3 Reversal Pattern. This pattern is used for forex trading with a counter-trend style, indicating the end of a trend and potential entry points for a new trend reversal. By identifying the main trend, traders can observe this pattern in both uptrends and downtrends.

Structure of the 1-2-3 Reversal Pattern

This pattern forms after three price movements, creating three pivot points and a confirmation level.

1. Pivot Point 1: The price reversal point during the trend. If the price breaks the trend line after pivot point 1 is formed, the pattern becomes more reliable.
2. Pivot Point 2: The next reversal point that may form outside the previous trend line, indicating the potential end of the trend.
3. Pivot Point 3: An important price correction point for preparing entry positions. This point should not exceed pivot point 1 to keep the pattern valid.
4. Confirmation Level: Entry point in the market, located at the same level as pivot point 2.

Key Points of the 1-2-3 Reversal Pattern

Some key points in applying the 1-2-3 Reversal Pattern:

• Place Stop Loss a few pips above (uptrend) or below (downtrend) pivot point 1.
• Avoid entry if pivot point 3 exceeds pivot point 1.
• Use the distance between pivot points 1 and 2 as the Take Profit target, applying a Risk and Reward Ratio of 1:1.

Relation with the Ross Hook Pattern

The Ross Hook Pattern cannot be separated from the 1-2-3 Reversal Pattern, as the Ross Hook forms from the retest of the Breakout of the Reversal Pattern. The Ross Hook serves as a re-entry signal and continuation of price movement after the Reversal Pattern.

Formation of the Ross Hook Pattern

The Ross Hook Pattern forms when the price breaks pivot point 2 and experiences a correction that does not exceed pivot point 3. This pattern indicates the continuation of the trend after the 1-2-3 Reversal Pattern.

Trading Strategy Rules for the Ross Hook Pattern

To effectively use the Ross Hook Pattern, apply the basic rules:

1. Entry Point: Choose an entry point after the price correction and breaks Higher Highs (uptrend) or Lower Lows (downtrend).
2. Stop Loss: Place Stop Loss above the highest correction point (downtrend) or below the lowest correction point (uptrend).
3. Take Profit: Measure the distance between Pivot Point 3 and the Hook point to determine Take Profit. Alternatively, use the nearest support or resistance level.
4. Watch the Distance: Avoid entry if the Ross Hook Pattern is too far from the 1-2-3 Reversal Pattern, as it may reduce signal accuracy.

Understand the concepts of the 1-2-3 Reversal Pattern and Ross Hook Pattern as proven profitable trading strategies. Continuous practice is required, especially for beginner traders, to recognize and apply these patterns correctly. Use a demo account before live trading to minimize risks and boost confidence in implementing this strategy.

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