The NR7 (Narrow Range 7) breakout strategy is based on identifying a day with the narrowest range of the previous seven days and then entering a trade in the direction of the subsequent breakout. Here's a simple strategy on how to trade with NR7 strategy
1. Identify the Narrow Range Day: Look for the day with the narrowest trading range among the previous seven days. The trading range is the difference between the high and low prices for the day.
2. Wait for the Breakout: Once you identify the NR7 day, wait for the price to break above the high or below the low of the NR7 day.
3. Set Entry and Stop-Loss: For a bullish breakout (above the high of NR7 day), set a buy entry a few ticks/pips above the high of the NR7 day. For a bearish breakout (below the low of NR7 day), set a sell entry a few ticks/pips below the low of the NR7 day.
Set a stop-loss order on the opposite side of the breakout level to manage risk.
4. Profit Target: Set a profit target based on the average daily range or use a risk-reward ratio (e.g., 1 (risk) : 2 (reward) or 1(risk) : 3 (reward)
5. Time Frame: This strategy is designed for the daily time frame, so monitor the market once a day, preferably at the close of the daily candle.
6. Risk Management: Use proper risk management techniques. Consider risking only a small percentage of your trading capital on each trade.
7. Avoiding Choppy Markets: Be cautious in choppy or ranging markets. This strategy works best in trending markets.
8. Filtering Signals: Consider using additional technical indicators or chart patterns to filter signals and increase the probability of success.
9. Back testing: Before implementing the strategy, back test it on historical data to understand its performance under various market conditions.
10. Continuous Evaluation: Regularly evaluate the performance of the strategy and make adjustments as needed.
Remember, no strategy is foolproof, and past performance is not indicative of future results. Always trade responsibly and adapt your strategy to changing market conditions. In my next blog I will share my secret of selecting stocks for NR7 strategy.