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NR7: an old friend

Just a quick post to remind you of a technical tool you probably already know about. Like so many things that work, it’s not exciting or sexy on the surface. It might seem overly simplistic or just not that interesting–but this is a powerful pattern that demands attention.

NR7 means that today’s session is the narrowest range of the past seven sessions. This was a condition that Toby Crabel wrote about in Day Trading with Short Term Price Patterns and Opening Range Breakout. This is a now-famous out of print book, and I can remember when no copies were available for under $1,000 a few years ago–a great book focusing on real stats and what actually works in the market. Take a look at the chart below:

S&P 500 futures with NR7 days in red
S&P 500 futures with NR7 days in red

This condition sets the market up for a trend day; there is a higher probability of the following day 1) having a larger than normal range and 2) having more directional intraday action. Used alone, this pattern can tell intraday traders when they should be focusing on potential trend days the following day. Used on conjunction with other conditions and patterns, it becomes even more powerful.

Take a few moments to inspect the chart above and to note what types of days typically follow NR7 days. Think about how you might incorporate this information in your own trading plan–there is valuable information here for trade entry, risk management, and for many other aspects of the trading process, as well. This is a powerful tool that probably should be in your toolkit as a technical or tactical trader.

AdamHGrimes

Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.
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