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The candlestick pattern, which is the core of the Red-White-Red (RWR) strategy, consists of a red, a white and a red candle. Red-white-red are also the colours of the Austrian national flag. No coincidence … the trader who designed and uses this strategy is Austrian. Patterns tend to be a visualization of market psychology. The psychology behind the RWR pattern can be condensed as follows: weakness followed by a 1-day rebound, followed by one day of hesitation, followed, hopefully, by a market rise.
The following is typical for the Red-White-Red strategy:
The strategy can be used for swing trading on all instruments.
|Suitable for||: Market indices (DAX, DOW ...)
: Forex (EUR/USD ...)
: Commodities (oil, gold ...)
|Instruments||: Futures, CFDs, forex and stocks|
|Trading type||: Swing trading|
|Using NanoTrader||: Manual or (semi-)automated|
of a Red-White-Red pattern.
To have an RWR candlestick pattern the following three criteria must be met in a day chart.
When all the criteria are met, the platform will colour the background of the chart, behind the pattern, gold.
The NanoTrader offers pattern recognition, trading signals and trading strategies.
A long position is bought at the market price, when an RWR pattern occurs and the market moves above the high of the second red candle. This price level is indicated by a horizontal green line.
The open position is managed by a profit target and a stop loss. Both the profit target and the stop loss can change during the life span of the open position. These changes happen according to specific rules.
The profit target follows these rules:
The stop follows these rules:
To quote the trader who designed
the Red-White-Red strategy: “The exit rules underline how
important it is to quickly get a handle on the risk of an open
shows a typical RWR pattern: weakness, sudden 1-day strength,
a day of hesitation, and a market rise. This position reaches
the target the day after it has been opened.
shows a trade on the FTSE 100 index. The position is
profitable after two days; therefore, it has not been closed
at the market price. After three days the position is still
open and the stop loss order was automatically increased to
the break-even level. The position reaches the profit target.
Using the NanoTrader follow these steps: