ORB Nr4 CANDLESTICK PRICE ACTION DAILY STRATEGY

LONG

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Step #1 How to Identify the ORB Nr4

The ORB pattern is defined as a trade taken at a fixed value of the opening range.
The Opening range Breakout trade is more effective if taken after an inside day that has its daily
range smaller than the previous 3 days, which is where the Nr4 stands for. You have three candles
followed by another candle with a daily range narrower than the previous three days.

Note #1: The 4th day doesn’t necessarily need to be an inside day, it only needs to have its daily
range smaller than the previous 3 days. However, inside days tend to produce a higher success rate.
The ORB Nr4 pattern can be the best candlestick patterns for intraday trading too. You simply have
to apply the same rules outline in this guide on your favorite intraday chart
What if we told you that, 40% of the time the first trading hour can tell you what is the high and the
low of the day. Our candlestick patterns strategy incorporates this price behavior so you can better
manage your risk and set your targets.

Basically, you can become a proficient trader.

Like with all our trading strategies we’re going to give you first the trading rules by going through an
actual live trade example that uses the best candlestick patterns mentioned through this PDF guide.

Step #2: Identify the best candlestick patterns and mark the high and the low of the 4th candle
When you search for the ORB Nr4 candlestick chart pattern keep in mind two things:

1-The Daily range of the 4th candle needs to be narrow and smaller than the previous 3 candles.
2-The 4th candle price range also needs to be inside the candle number 3.

The ORB Nr4 pattern in the chart above is a bullish candlestick patterns because it leads to
a bullish move.

Narrow daily trading ranges suggest contraction. And contraction always leads to expansion. This is
kind of a general rule because the markets do move from periods of contractions to periods of
expansion.

This is the reason why this ORB Nr4 candlestick pattern is so powerful.

Step #3: Switch to 1h TF and :

**Buy if we break the high,
**Sell if we break the low of the Nr4 candle.

Our trade is taken the next day after the Nr4 pattern showed up. In order to have a clear view of the
short-term price action we need to switch our focus to the 1 hour time frame.

Note #2: Only Buy or Sell if the breakout happens during the first 5 hours of the new trading day.

We use the Opening Range Breakout technique to time the market and have an effective trade entry.
Trades based on the ORB – Nr4 candlestick chart pattern will show you a profit instantly.

Now, if the trade is not showing you a profit right away than your trade becomes more vulnerable.
As a general rule, if after the first trading hour your trade is not in the green, you can safely close the
trade at the market.
Of course, you can only do that if your stop loss hasn’t been triggered in the meantime.
Step #4: Place SL below NR4 day low,

Step #5: Take profit using a trailing SL below each 1h candle low/high
For buy trades, hide your stop loss below Nr4 day low. The ORB – Nr4 pattern tends to precede
strong trend day activity, so your stop loss should be rarely hit.
Our take profit strategy is fairly easy and it’s slightly modified from the original strategy highlighted
in the “Day Trading with Short Term Price Patterns and Opening Range Breakout” book written by
Toby Crabel.
Even though the ORB nr4 pattern tends to lead to trend trading days we’re more conservative and
want to quickly
take profits. We would trail our SL below each 1h candle low and wait for the market to reverse to
take profits.

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Simple Tactics For Trading Narrow Range Bars – NR4,
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Many price action traders are familiar with various candlestick patterns,
however, not too many are well-versed in the application of narrow range
bars. Narrow range bars can offer insights into the development of future
price action, and thus are important price action signals that should be
studied alongside candlestick formations.

We’re going to be studying three types of narrow range bar formations in

this lesson. This includes the NR4 bar, the NR7 bar, and the NR4/ID bar.
Each of these three formations can offer solid trading opportunities, as they
help us catch the next most likely price swing after a period of
consolidation.

Download the short printable PDF version summarizing the key points of this
lesson…. Click Here To Download
Understanding Market Volatility

Market volatility measures the relative price movements within a financial

instrument. Volatility is an important consideration to make money in the
markets.

Without it, the opportunity to take advantage of price swings would not
exist. This is something that most traders understand intuitively, however,
many are not aware that volatility tends to be mean reverting.
There is a distinct rhythm in the financial markets, and this appears as
repeating cycles that are constantly moving between periods of calm and
periods of excitement.

More specifically in technical analysis terms, the periods of calm are often

seen on the price chart as trading ranges and consolidations; and periods of
excitement are often associated with strong directional price movement.

This is the essence of market volatility. Markets move between periods of

high volatility to low volatility, and from periods of low volatility to high
volatility.

Many times it’s easier to predict future volatility than it is to predict future
price movement. Once we’re able to recognize this rhythm, we can take
steps in trying to locate periods of low volatility in expectation of a volatility
expansion which can lead to the next directional price leg.

And along the same lines, we can use this information to begin scaling out
of our position. After a period of high volatility has ensued, we can
anticipate a slowdown in the form of price congestion. Knowing when to
exit a trade is equally important as knowing when to enter a trade.

Generally speaking, most traders will tend to make money during trending
periods, which is characterized by higher volatility periods.

And on the flipside, there will tend to lose the most amount of money
during consolidations or range bound market conditions. It’s during these
times of consolidation when volatility is often at the lowest point in the
cycle.

As so, it’s important to pay attention to where we are within the overall
volatility cycle. By doing so, It will help prepare you for the upcoming
market terrain and allow you to better position into solid trading
opportunities.

Now that you understand what market volatility is, how can we go about
measuring it? Well, there are many different techniques at the trader’s
disposal for measuring volatility in a particular market.

A popular measure of volatility in the equities market is the VIX.

And options traders often use implied and historical volatility as well.

Price action forex traders often rely on candlestick and bar patterns to help
them measure volatility trends. And that’s what we’re going to focus on
here; the use of specific bar patterns on the price chart to measure and
trade volatility setups.

Introduction To Narrow Range Bars

The concept of narrow range bars was popularized by Toby Crabel in his
excellent book entitled “Day Trading With Short-Term Price Patterns And
Opening Range Breakout”.

Several other authors have expanded on the concepts that he originally

discussed in his book. Two of the more notable ones include Linda
Bradford Raschke and Lawrence Connors, who cowrote “Street Smarts:
High Probability Short-Term Trading Strategies”.

Essentially the idea behind narrow range bars is that a trend day or multi-
day trend will often be preceded by a period of contraction, which can be
easily seen and quantified on a price chart.

Though the original concept of narrow range bars was applied to intraday
trading strategies, I have found that they are just as useful in their
application for swing trading.

The narrow range bar strategy is a simple breakout strategy, that enters at a

predefined high for a long entry, and at a predefined low for a short entry.
These predefined levels are typically the high and low of the narrow range
bar formation.

The beauty of the strategy lies in its simplicity. And although narrow range
bar breakouts are simple to execute, they are nevertheless highly effective
patterns when traded correctly.

The three main variations of the narrow range bar breakout strategy is the
NR4 breakout, which is a breakout from the narrowest bar of the last four
days. The second variation is the NR4/ID set up, and this entails a breakout
from the narrowest range bar of the last four days which is also an inside
day bar.

And the last variation of the strategy is the NR7 breakout, which is
essentially the same as the NR4 breakout, however in the case of the NR7,
we would look for a breakout from the narrowest range bar of the last seven
days.

In addition to the different narrow range patterns, there are number of

ways that a trader can filter the setups further in order to achieve the best
results. One type of filter that’s typically used with narrow range bar set ups
is a trend filter.
The trend filter only allow trades wherein the longer-term trend is in sync
with the direction of the narrow range breakout. One of the more effective
trend filters that can be incorporated with this strategy is a moving average.

We’ll be taking a closer look at each of three different variations on the

price chart, and discuss a method for filtering and trading these narrow
range bar setups.

Trading the NR4 Bar

The narrow range 4 or NR4 bar is the narrowest range bar over the last four
trading days. As such, the NR4 pattern consists of four bars in total. The
fourth or last bar will have a range that is less than the range of each of the
previous three bars. Let’s take a look at what the NR4 pattern appears like
on the price chart.
In the chart above, you can see the last four bars of price action noted on
the chart. If you look closely, you can see that the last bar, bar four, has a
smaller range than the previous three bars, bars 1 to 3. As such, bar 4
constitutes an NR4 bar, and validates the pattern.

The process for finding an NR4 setup is fairly straightforward. First, you
need to check the high and low data for each of the last four bars. This will
allow you to calculate the high low range for each bar.

Then you would compare the range of today with the range seen in each of
the previous three bars. If you find that today’s range is less than the range
of each of the previous three days, then the pattern can be labeled as an
NR4 structure.

With today’s computing technology, it’s quite easy to write a script and
program this process to be done automatically. Alternatively, you can
access some free pre-programmed narrow range indicators that are
available to perform this task.

In any case, once you have recognized the NR4 pattern on your price chart,
you can take the next step in further evaluating and consider trading the set
up. At the most basic level, the signal for entering into a long trade occurs
when the price breaks above the high of the NR4 bar. Alternatively the
signal for entering into a short trade occurs when the price breaks below
the low of the NR4 bar.

NR4 Bar Trade Examples

We will create a simple strategy for trading the NR4 setup. The rules are
outlined below:

NR4 Bar Setup Rules – (Using Daily Chart Timeframe)

Rules For Long NR4 Trade Setup

 The bar following the NR4 bar must break above the NR4 bar.
 Price must be above the 89 Period Simple Moving Average at
breakout.
 Buy 1 pip above the high of the NR4 Bar
 Stop loss to be placed 1 pip below the low of the NR4 Bar
 Exit Trade at the close of 3 bars following the breakout bar.

Rules For Short NR4 Trade Setup:

 The bar following the NR4 bar must break below the NR4 bar.
 Price must be below the 89 Period Simple Moving Average at
breakout.
 Sell 1 pip below the low of the NR4 Bar
 Stop loss to be placed 1 pip above the high of the NR4 Bar
 Exit Trade at the close of 3 bars following the breakout bar.
Now that we have rules in place for trading the NR4 set up, let’s take a look
at a price chart and apply the strategy. The chart below is a daily chart of
the British Pound-US dollar currency pair. You can see there are five arrows
pointing to specific bars colored in blue. These blue bars represent NR4
bars. The light blue line noted on the chart is the 89 period Simple moving
average line.

So let’s now analyze each of the five NR4 trading signals that occurred on
this price chart. Starting from the far left, the first signal occurred at the
break below the NR4 bar. We would’ve exited the position three bars after
the breakout bar, which resulted in a profitable trade.

The second signal occurs shortly after the price crosses above the 89 SMA.
Here, we would wait for a break above the high of the NR4 bar. We can see
that occurred on the following bar, which was our signal to go long. We
would’ve closed the position three bars following this breakout bar. This
would’ve occurred upon the formation of the shooting star candle that
formed the swing high.

The third NR4 trade signal occurred after a short pullback. Notice how the
candle following this NR4 bar broke the high and closed near the top of its
range. The stop loss which would be placed at the low of the NR4 bar and
was never in jeopardy. The exit was triggered three days following the
breakout bar, which occurred on a day wherein the bar itself was an NR4
candle. This is shown by the fourth arrow on the chart.
The last NR4 trade set up occurred as price was rising well above the 89
SMA line. You can see how price breaks the high of this NR4 bar and
continues its upward movement over the next few days. The closing price
on the last candle on this chart represents the exit point.

Trading the NR4/ID Bar

The NR4/ID bar has a similar structure to the NR4 bar, with the added
condition that the last bar, the fourth bar, must also be an inside bar.
An inside bar is one wherein the high low range is contained within the
previous bar. And so, this narrow range inside bar set up occurs when we
have an NR4, wherein the high low range of fourth bar is contained within
the third bar within the structure.

Here’s an example of an NR4/ID bar pattern:

As can be seen here, bar four has a smaller range then each of the previous
three bars, bars 1-3. As such, bar four is considered an NR4 bar. Now in
addition to that, bar four, is also contained within bar three. More
specifically, the high in bar four is a lower than the high seen in bar three,
and the low of bar four is a higher than the low seen in bar three. Because of
this, we can say that bar four is an inside bar pattern. And so the
combination of the structure being both an NR4 bar, and an inside bar,
characterizes it as an NR4/ID bar structure.
The process for locating and NR4/ID bar structure is similar to that of an
NR4 bar structure, with one notable added condition. That condition being
that bar four must also be an inside bar.

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The basic signal for entering into a long trade for the NR4/ID set up occurs
when the price breaks above the high of the NR4/ID bar. And conversely,
the signal for entering into a short position occurs when the price breaks
below the low of the NR4/ID bar.

NR4/ID Bar Trade Examples

Here are a simple set of the rules for trading the NR4/ID Bar Setup:

NR4/ID Bar Setup Rules – (Using Daily Chart Timeframe)

Rules For Long NR4/ID Trade Setup

 The bar following the NR4/ID bar must break above the NR4/ID bar.
 Price must be above the 89 Period Simple Moving Average at
breakout.
 Buy 1 pip above the high of the NR4/ID Bar
 Stop loss to be placed 1 pip below the low of the Outside Bar. (This is
the bar immediately preceding the NR4/ID Bar)
 Exit Trade at the close of 6 bars following the breakout bar.

Rules For Short NR4/ID Trade Setup:

 The bar following the NR4/ID bar must break below the NR4/ID bar.
 Price must be below the 89 Period Simple Moving Average at
breakout.
 Sell 1 pip below the low of the NR4/ID Bar
 Stop loss to be placed 1 pip above the high of the Outside Bar. (This is
the bar immediately preceding the NR4/ID Bar)
 Exit Trade at the close of 6 bars following the breakout bar.

Let’s now turn our attention to the chart below which illustrates how we
could go about trading this Inside day strategy based on the rules above.
The chart is a daily chart of the US Dollar-Swiss Franc pair. Each of the six
blue arrows points to a NR 4/ID bar. You will notice that on this chart that
the NR4/ID bars are filled as black candles. The downward sloping light
blue line above the price action represents the 89 period Simple Moving
average.

So starting from the left side of the screen, we can see that the first NR4/ID
bar setup would not have executed a trade. The reason being is that the bar
following this NR4/ID bar does not break below its low on the next bar. As
such we would pass on this particular set up.

The second NR4/ID bar would’ve executed one pip below its low. We can
see that this occurred well below the 89 SMA line and did so during the
candle following the NR4/ID candle. The stop loss would’ve been placed
above the outside bar, which is the bar preceding the NR 4/ID bar. We
would’ve exited the trade for a profit at the close of the sixth bar following
the breakout, which is the first up candle shown after the breakout.

Moving on to the third NR 4/ID set up which occurs near the middle of the
price action on this chart, we would again be looking for a short
opportunity. However this did not materialize because the bar following the
NR4/ID candle did not break below the low on the following candle. This
would’ve resulted in bypassing the trade opportunity.

Looking at the fourth potential set up, we can see a very narrow range bar
that formed the NR4/ ID structure. The short entry here would have been
executed on the following bar with a stop loss above the high of the
previous outside candle. The trade would’ve been exited for a profit at the
close of the sixth bar following the breakout bar.

The fifth NR4/ID bar set up was also a valid shorting opportunity. Notice
how the bar following the NR4/ID bar breaks below the low, thus executing
a short entry. We were not in any jeopardy of the stop loss being hit, and we
would’ve been able to exit with a profit on the sixth candle close following
the breakout, which is shown here as the first green candle following the
breakout to the downside.

The last NR4/ID trading set up occurs near the far right edge of this chart.
Notice how the 89 SMA is well above the short entry trigger, and we
would’ve been well protected with our stop loss being placed just above the
outside bar. Our take profit point would have been the sixth bar following
the breakout, which was quite bearish, and is seen as  the next-to-last
candle shown on the chart.

Trading the NR7 Bar

The narrow range 7 or NR7 bar is the narrowest range bar over the last
seven trading days. As such, the NR7 pattern consists of seven bars in total.
The seventh or last bar will have a range that is smaller than the range of
each of the previous seven bars. Let’s see what the NR7 bar pattern looks
like on a price chart.
In this chart example, you will notice the last seven bars of price action
circled. Notice how the final bar, bar seven, has a narrower range than the
previous six bars preceding it. So simply, bar seven has a smaller high low
range, then each of the bars numbered one through six. As a result, bar
seven can be labeled as an NR7 bar, and confirms the pattern.

As with the process for locating the NR4 pattern, we will follow the exact
procedure in locating an NR7 formation as well, with one exception.
Instead of confirming the high and low data points for each of the last four
bars, we will lookback a total of seven bars when evaluating the NR7
pattern.

As for the entry signal, the NR7 trading set up works the same way as the
NR4 set up. That is to say that a long signal occurs when the price breaks
above the high of the NR7 bar. And the signal for entering into a short
position occurs when the price breaks below the low of the NR7 bar.

You might be wondering at this point, what the practical difference is

between trading in NR7 versus an NR4 set up, and why we might choose
one over the other. Well, it should be obvious to you, that you will witness
many more NR4 set ups then NR7set ups, due to the less stringent
requirement for the NR4 bar versus the NR7 bar.
The NR7 bar requires a higher level of compression in the price action than
does the NR4 bar. And as a result of this, we will often see a breakout
following in NR7 bar to be more substantial than a breakout that occurs
following an NR4 bar. This is not always the case, however, in a good
percentage of cases, this guideline holds true.

NR7 Bar Trade Examples

Below you will find the rules outlined for trading the NR7 Bar Setup:

NR7 Bar Setup Rules – (Using Daily Chart Timeframe)

Rules For Long NR7 Trade Setup

 The bar following the NR7 bar must break above the NR7 bar.
 Price must be above the 89 Period Simple Moving Average at
breakout.
 Buy 1 pip above the high of the NR7 Bar
 Stop loss to be placed 1 pip below the low of the NR7 Bar
 Exit Trade at the close of 6 bars following the breakout bar.

Rules For Short NR7 Trade Setup:

 The bar following the NR7 bar must break below the NR7 bar.
 Price must be below the 89 Period Simple Moving Average at
breakout.
 Sell 1 pip below the low of the NR7 Bar
 Stop loss to be placed 1 pip above the high of the NR7 Bar
 Exit Trade at the close of 6 bars following the breakout bar.

Now that we understand the rules for trading the NR7 bar set up, let’s take
a look at some practical examples. The chart below displays the US Dollar-
Canadian Dollar pair on the daily timeframe. There are a total of six signals
shown on this chart, and the yellow candle bodies represent the actual NR7
bars. And again the light blue line towards the bottom of this chart
represents the 89 period Simple moving average line, which is our trend
filter.
Starting at the far left we can see that the first NR7 bar set up would’ve
called for a long entry on the following bar. This would have resulted in the
position being stopped out as the low of the NR7 was triggered shortly after
the entry.

Moving on to the second NR7 bar set up, we would be looking for a short
entry following the NR7 bar. A breakout occurred on the following bar,
which got us into a short position here. Here too, the trade resulted in a loss
as price eventually broke above the NR7 candle triggering our stop loss.
This occurred around the same time the price was moving from below to
above the 89 SMA line.

We can see that the third NR7 set up occurred shortly after a cross above
the 89 Simple moving average line. A long entry was triggered on the break
above the high of the NR7 bar on the next candle. We would place the stop
below the low of the NR7 bar. Our exit would’ve occurred on the close of the
sixth bar following the breakout bar. This can be seen by the shooting
star candle formation that occurred preceding the strong green candle.

The fourth NR7 bar set up appears the day after the aforementioned strong
green candle. Interestingly enough, the break above the high of this NR
seven candle eventually formed an NR7 candle itself. However at this point
we were already in the trade on the long side, and would have continued
with the position until our exit signal, which ultimately resulted in a
profitable trade.
The last NR7 candle formation is well above the 89 SMA. We can see that
the price broke to the upside the next day resulting in the triggering of our
buy entry order. The exit would be triggered on the sixth bar, which in this
case is the sixth day, following the breakout bar. This is shown by the last
green candle on this price chart.

Download the short printable PDF version summarizing the key points of this
lesson…. Click Here To Download
Summary

You should now have a pretty good understanding of how volatility

contraction and volatility expansion works in the market. I showed you
three different bar formations that can assist you in locating periods of
consolidation in the market, that can lead to a short-term price trend.

There are many different ways that you can incorporate narrow range
candles into your trading, I’ve illustrated a few simple concepts for trading
narrow range bars in this article, which should serve as a good starting
point for you to expand on these ideas and incorporate them within your
overall trading plan.
Home  Technical Analysis

NR4 and NR7 Trading Strategy

Setup

 by Elearnmarkets

 January 20, 2022

in Technical Analysis, Charts, Patterns & Indicators

Reading Time: 6 mins read

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Bengali: এই ব্লগটি এখানে বাংলায় পড়ু ন।

Narrow Range 4 and Narrow Range 7 help to find the calm so that we can prepare and profit
from the impending storm. Market goes through regular contraction and expansion cycle.

“The quiet period before the next explosive market move is like the calm before the storm”

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.

Table of Contents

 NR4 and NR7 Trading Strategy

 How to find NR7 day?

 How to find NR4 day?

 NR4 and NR7 Trading Example

 Key Takeaways

In this blog, let us discuss what does Narrow Range 4 and Narrow Range 7 mean and how to
trade with them:

NR4 and NR7 Trading Strategy

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.

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 behind this pattern is same as the Bollinger Band Squeeze, a volatility

contraction followed by a volatility expansion.

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.
The NR 7 day can be seen from the chart below:

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.

Learn from Market Experts:- Technical Trading Made Easy

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

NR4 and NR7 Trading Example

The trading example shows Reliance with 4 signal signs in less than 2 months. We have also
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. One can notice that
NR 4 is formed back to back on three different occasions. The first NR 4 gave bearish signal and
we can see that the next day there is gap down opening which confirms the signal. Next NR 4
signal is a bullish reversal 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.
Finally we can notice NR 7 giving bearish breakout, confirmed by the volume and next day
candle.

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.

Also Read: How to filter stock for Intraday Trading?

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.

Key Takeaways
 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.
  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.

 One should buy only when previous candle is NR7 candle, and current candle has a Gap-Up
opening.

 One should sell only when previous candle is NR7 candle, and current candle has a Gap-Down
opening.

 Preferred timeframe for this setup is daily.

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Tags: advanced Breakout Patterns english Narrow Range NR4 NR7