Sometimes Ross hooks are 1–2–3 patterns that occur subsequent to the initial 1–2–3 formations that cccur at lows and highs. Indeed, many of them are formed at the intermediate and minor lows and highs that occur in trending markets. But to call them all 1–2–3's would be to present an erroneous picture. Not all Ross hooks are identifiable as 1–2–3's.

1–2–3 patterns are the direct result of certain market forces at work. Ross hooks are the result of a different market phenomenon. Then, too, there are Reverse Ross hooks which are a bit more difficult to see, identify, and trade. The number two point shown next is a reverse Ross hook.

You should know how to identify and trade Ross hooks, reverse Ross hooks, double bottom Ross hooks, and double top Ross hooks. But at first I need to show you what these hooks look like, and also show you how they relate to, and often derive from, the basic and fundamental 1–2–3 formation. Later, I will show you how I utilize some of the trading tools such as identifying a trend, knowing what constituted a 1–2–3 high or low, identifying congestion.

The following chart shows a 1–2–3, and then the subsequent Ross hook.

Obviously these „pointy places“ were different from the number two points of 1–2–3 formations. It became equally obvious that they had nothing to do with supply and demand.

If that were the case, there were only two things that could be causing them. One was obvious — the hooks were caused by profit taking. Whenever the market had moved sufficiently to satisfy a majority, profit taking caused the market to begin to move counter-trend.

The other reason was not so obvious, at least not to me, and not at that time. Today, it has become all too obvious and is a splendid way to pick the pockets of naive, tess experienced traders.

At the point in my trading career where I discovered the hooks, I was almost totally unaware of the phenomenon I've come to call „the technical indicator trader.“

I had been taught classical technical analysis which involved learning how people traded heads and shoulders, megaphones, pennants, flags, speed lines, etc. Also, I had been taught how to fade these traders in the markets. I had been taught a great deal about floor trader action in the markets, and how to neutralize what they do.

I could generally spot an engineered move by large operators on the floor. Then I could either participate or not according to my choosing.

What I was ignorant of was the use of moving average crossovers, and technical indicators such as stochastics, RSI, and others that were coming to be used in the markets.