One of the tools available to me in my early trading was one that clearly identifies the trend. The tools allowed me to lock onto a definite set of rules. Either the market was trending or it was not, according to my set of rules. Wow I want to show you what those rules were. They are still correct after these many years. They were utilized before I ever began trading, and they worked as well then as they do now. Is there some sort of magic about these rules? Definitely not. Their value lies in the fact that they afforded me a concrete definition of what constituted a trend. As long as I followed the rule, I could safely assume the market was trending.
Did the rule work one-hundred percent of the time? No! I have not yet found a perfect way of trading. The rule worked most of the time, and that was sufficient for me.
The Rule
A market had to move in a single direction, for instance up, from a low to a high, or down, from a high to a low. Once the market was in motion, it then had to react, or correct sufficient to give me a connecting point for a trend line. This connecting line would have its inception at the original high or low, and its terminus would be the reaction high or low. This concept is best shown by illustration.
When prices would take out the extreme of the low bar in the direction of the trend line as shown below, I would then assume a trend had begun. As stated, this was not a perfect method for identifying a trend, but it is the one I use when I want to trade Ross hooks exclusively.
Over the years, this has proved to be an adequate and excellent way to determine a trend.
Before you race out to start trading this way, please realize there is more to this except than what I've just shown. Money management and some filters need to be applied. For now, I simply want you to begin grasping the concept and the terminology that it is my habit to use.
