Narrow Range 4 and Narrow Range 7 (NR4 and NR7 Trading Strategy)

NR4 and NR7 Trading Strategy, helps to find before hand stocks so that we can prepare and profit from the impending movement in stocks. Market goes through regular contraction and expansion cycle and this where NR4 and NR7 Trading Strategy works the best.

In this trade setup, you should wait patiently for market in order to enter in contraction which means for range of the bars to reduce. Once we spot NR4 or NR7, a bigger price movement and direction is expected. It is a breakout and reversal pattern which helps to generate profit after a range.

What we cover here are

1. what is NR4 and NR7 Trading Strategy
2. How to find NR7 day?
3. How to find NR4 day?
4. NR4 and NR7 Trading Examples

Why will NR4 and NR7 Trading Strategy work?

Narrow Range Trading Strategy is a breakout based method that assumes that the price of the security trends up or down after a consolidation in a narrow range.

BHARTI AIRTEL Share on Daily timeframe marking NR4 candle with lowest range( high-low of four days compared) in last 4 candles.

For NR7 the default period is 7 days which means that if the price range of any particular days is lowest as compared to last 7 days then that day is NR 7 day.Similarly, For NR4 the default period is 4 days which means that if the price range of any particular days is lowest as compared to last 4 days then that day is NR 4 day.

The range is calculated as the difference between High and Low of the particular day.The day after the NR 7 or NR 4 day acts as the confirming day on where the price will move further. If the breakout happens at the high of NR 7 candle then indicates bullishness where as If the breakout happens at the low of NR 4 candle then indicates bearishness.

The philosophy idea behind this pattern is same as the Bollinger Band Squeeze, a volatility contraction followed by a volatility expansion and contraction.

How to find NR7 day?

Following are steps to identify NR7 day:

1. Get the high and low data of last few days
2. Calculate the range for every day (high-low)
3. Compare the range of today and previous 6 days range.
4. If today’s range is the smallest of all the 7 days then it is NR 7 day else not.

HCL Tech Share on Daily timeframe marking NR7 candle with lowest range( high-low of four days compared) in last 7 candles.

How to find NR4 day?

Following are steps to identify NR4 day:

1. Get the high and low data of last few days
2. Calculate the range for every day (high-low)
3. Compare the range of today and previous 3 days range.
4. If today’s range is the smallest of all the 4 days then it is NR 4 day else not.

The NR 4 day can be seen from the chart below:

BHARTI AIRTEL Share on Daily timeframe marking NR4 candle with lowest range( high-low of four days compared) in last 4 candles.

NR4 and NR7 Trading Example

The trading example above shows Bharti Airtel . We used Average True Range indicator which shows the range of the candles. We can see at the NR4 and NR 7 candle the ATR has decreased which means that the range of the candle is the lowest in the last 4 or 7 days.

A next day move above the high is bullish whereas below the low is bearish. NR 4 signal that breakout above high of previous day  is bullish signal which is confirmed by the volume and also bullish candle on the next day.

We can see back to back NR 4 candle that generated a bearish candlestick pattern. One should sell when the price crosses at the low of NR 4 candle or may incur loss if the signal does not work out. At this candle we can also see that ATR has declined.

Narrow Range 4 and Narrow Range 7 give you a chance to be ahead of trade follower/indicator who can jump in the trend after you. One of the easiest ways to trade this setup is to go long above the Day’s high of NR7 or NR4 with a stop of the at the day’s low of the same.

You can go short below the Day’s low of NR7 or NR4 with a stop at the day’s high of NR7 or NR4 day.This pattern gives a trader a distinct edge to trade at least next 2-3 days. In many situations, NR 7 breakout is found near the beginning of new wave.

Main bullet points:

1. Like bollinger band squeeze and expand, For NR7 the default period is 7 days, if the price range of any particular days is lowest as compared to last 7 days then that day is NR 7 day.
2. Like bollinger band squeeze and expand,For NR4 the default period is 4 days, if the price range of any particular days is lowest as compared to last 4 days then that day is NR 4 day.
3. One should buy only when previous candle is NR7 candle, and current candle has a Gap-Up opening.
4. One should sell only when previous candle is NR7 candle, and current candle has a Gap-Down opening.
5. Preferred timeframe for this setup is daily for scanning the stocks before hand like with Chartink.

Brief Points covered:

1. nr4 and nr7 screener – chartink link will be provided
2. nr7 excel formula – Excel sheet calculator will be provided
3. nr4 strategy – as explained above buy above high of NR4 candle and sell below low of NR4 candle
4. nr7 formula – as explained above range(high-low of each day compared to previous 3 days)
5. nr7 strategy accuracy – 70% accuracy when placed together with trend.(trend is your friend)
6. nr7 days intraday strategy- as explained above buy above high of NR4 candle and sell below low of NR4 candle
7. nr7 stocks for tomorrow – Will providing stocks with NR4 and NR7 Candles and scanner link in Chartink
8. nr7 strategy scanner – Chartink link will be provided here shotly.