Hey now. I'm back with another strategy review. In this video I am going to show
you how to trade this award-winning system that was developed by Rob
Hoffman who has won over 30 international trading competitions. And for those who stick
around to the end I'm going to share with you some of my optimization ideas. Just be
sure to hit that subscribe button before your trading account lands on your head.
This system is a variation of the Hoffman Inventory Retracement strategy.
And like most trading systems it can be adapted to Forex, crypto,
options, stocks, indices, or any instrument that has significant volume and market participants.
This training strategy utilizes two free TradingView indicators.
As always links and settings to all indicators are listed in the description.
The first indicator is the Rob Hoffman Inventory Retracement Bars. Inputs and
style will be kept at default. This indicator will print a green triangle below a candle
that has retraced at least 45% to the upside, and a red triangle above a candle that retraces
45% or more in the bearish direction. This indicator will provide our entry signals.
The second free TradingView indicator is the Rob Hoffman overlay set. I am going to uncheck
these lines, and color these lines in white.
This indicator will determine the trend direction and provide entry confirmation signals.
Let's go over enter criteria and review some examples.
As always system rules and details are listed in the description
below. This chart is Bitcoin versus the US Dollar 15-minute Japanese candlesticks.
The rules to enter along on my version of the Hoffman Inventory Retracement are, first,
the slow line and purple must be above the fast line in green with no other lines in between them.
Second, we are looking for a red triangle from the Inventory Retracement Bar indicator. Our rules are
met when this candle closes that is our trigger. A buy stop order is placed at the top of the trigger
candle, the stop is placed at the slow line in purple. However if the trigger candle touched
the slow line then the stop must be placed at the fast line in green. And the target is 1 to 1.5.
We enter the trade on this candle, and after a while this example hits the target on this
very bullish candlestick. If you enjoy this content make sure to click that like button.
I have one more long example. The slow line is above the fast line with no lines in between
then. We get a Rob Hoffman Inventory Retracement bar signal.
This is our trigger candle. A buy stop is placed at the top of the trigger candle,
since the trigger candle touches the purple line we are going to set the stop at the fast
line in green. And target one and a half times risk. The position is entered on this candle,
and after some extended consolidation, this one hits the target. Now we flip the shorts.
This is what I will test for shorts. First the slow line in purple must be below the fast line in
green with no other lines in between. Second ,we need to see a green triangle from the Inventory
Retracement Bar indicator. All of that happens on this candle here, that is our trigger candle.
A sell stop order is placed below the trigger candle, the stop is going to be placed at the
fast line in green, because the trigger candle touches the slow line in purple. And the target
is 1 to 1.5. The trade is entered on this bearish candle, and this example rapidly hits the target.
I'm going to show you one more quick short example.
So here we can see the purple line is below the fast line in green,
and if you look closely you can see that the fast line just crosses down under the white trend line.
Then we get an inventory retracement bar signal. This is our trigger candle. A sell
stop order is placed below the trigger candle and the target is one and a half times risk.
And here we can see that the trade was entered and hits the profit target on the same candle.
I'm going to share with you some phenomenal ideas on how we can improve the system
along with a Trader's Landing score. And now it's time to do, what i do.
If you enjoy this content hit the like button. Remember this is just 100 tests on one instrument
if you are thinking of using the system please do extensive back and forward testing and be sure to
let our community know what you discover. This test was done on Bitcoin versus the US Dollar
15-minute candles. It took about six weeks to get the 100 setups. Just a caveat on that, for this
test I took every signal whether I was already in a trade or not. This system does give off
many signals while you were in a trade which is probably why it won so many competitions. More on
that later. This data set produced a 56% win rate that included seven consecutive winners, paired
against five losers in a row. The maximum drawdown wound up being seven percent with a nice profit
factor of 1.9. Risking two percent per trade this test yielded a gross profit of eighty percent.
The equity curve here is very impulsive to the upside. Looking at the four-hour chart of the
testing period you can see that it very much mimics the equity curve. This tells me that
this system does get you into a trend which is exactly what a trend following system should do.
The question is how would it perform during this period of market action? Certainly fewer signals.
I give the system a trader's landing score of 8. Because it does get you into trends,
is an easy to understand repeatable system, but Rob Hoffman does trade
a more subjective version of this system that will yield better results. More on that next.
Remember the enemy of great is good. I have seven ideas on how we can improve this system.
One of the methods used by Rob Hoffman to maximize gains is using a trailing
stop loss level. For example if we exit the trade on the first touch of the green line,
our risk to reward on this particular setup is almost double.
Second, identifying the higher time frame trend can be key to the success of this system.
Here we can see a 4-hour chart at the bottom and a 15-minute chart on top.
On the 4-hour chart we see a lower high, than a break of clear support.
Which is when we zoom on the top chart and take all of those juicy setups.
Next, the indicator I use to confirm entries can be replaced. The traditional method is
to use just a 20 EMA that is sloping down at a 45 degree angle. Another method is to combine
EMAs from two different time frames on the same chart, or you can even use a Williams Alligator.
The next thing to highlight is the high number of signals the system gives,
and how to participate in them. If you are in a strong trend you can move your stop
to break even before hitting the profit target, thereby mitigating your risk. I
have some specific ideas on this concept that i can cover in our Circle Community.
The next tip is another way to exit the trade. By using the divergence detector
you can see that exiting this short when bullish divergence is detected yields a
huge trade. Of course this method would need to be combined with others to be most effective.
Additionally, Rob Hoffman designed the system based on the market actions of institutional
traders. As such the concept of an Inventory Retracement Bar is better suited for the daily
time frame. However, the test does indicate its utility on the smaller time frame charts.
If you want some more information on this system there are two YouTube videos you can watch. One
from TradePro, and the other from the Online Trading Signals Channel. Both are worth a look.
In addition to Rob Hoffman's own website, links to all are listed in the description.
If you want to interact with our community and support the work I am doing here,
head over to our Circle Community where we are discussing
all things trading related. And have a great day because you deserve it.