Red Dog Reversal
As a young trader in the late 1990s, Scott Redler became a student of Greg Capra, the founder of Pristine Trading and Creator of the Pristine Method of Trading Scott says that education provided him with many of the core principles he continues to use to this day.
Many students attribute the knowledge they acquired under Greg’s tutelage as the main reason for their success. A true testament to Mr. Capra’s teaching and his method that students use in the markets.
Scott is one of the many students whom Mr. Capra is proud of.
During Scott’s education, Mr. Capra taught many candlestick patterns. All of those patterns combine multiple technical concepts that come together as an investing and/or trading strategy.
Of the concepts that Scott learned — one that must have clicked with him — was the Bottoming Tail (BT) bar and the Topping Tail (TT) bar.
The BT or TT, combined with the other technical concepts like trend direction, support or resistance, and others make a strategy.
To market the strategy as his own, Scott decided to call the BT, TT pattern/strategy “the Red Dog Reversal.”
Why a Red Dog Reversal? As the story goes, Scott was a bartender and made a drink that was popular, which he called the Red Dog.
The BT and TT bars are reversal signals. Taking the reversal signal Scott learned in class, Scott combined his drink, the Red Dog, and added Reversal: Red Dog Reversal.
It is just a name, and others have made their own name for the candlestick BT and TT pattern. But this one is a catchy name.
Scott explained the pattern in an interview with Benzinga Nov. 8th2016 in this way.
An oversold stock that opens above the previous session’s low.
The stock would then reverse and trade down through the low.
Following which the stock reverses and moves to the upside.
When the stock breaks below the previous session’s lows, shorts may enter in. A move back above the previous session’s low could be used as a trigger for buying into the stock. The lows of the previous session could be used as the point for buying the stock, with the low reached intra-day set as the exit point in case if the bet backfires.
For A Stock On An Extended Upmove
If an asset class has seen an extended run-up, one could consider a short entry (selling the stock on the assumption that it will fall and consider entry later at a lower price). If the security breaches the previous session’s high and then retraces the gains, investors can position for a counter-trend move. The stop can be set at the day’s high, thus minimizing the risk.
You can learn many other candlestick patterns taught by Greg Capra, as well as stock and options investing and trading strategies, at MasterTrader.com.
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The key to successful trading is trading compelling price patterns formed by candlesticks, trends, price support and resistance and well as proper money management and discipline to adhere to one’s plan.
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