NR7 pattern trading strategy to earn profits from momentum breakouts – Part 26

NR7 pattern trading strategy to earn profits from momentum breakouts – Part 26
NR7 pattern trading strategy to earn profits from momentum breakouts – Part 26

Usually, after a period of calm waves, there will be a market breakout. Then the price will break the support and resistance levels to form a strong trend. Based on that principle, we can make a big profit from that breakout. And the NR7 trading strategy with 7 narrow range candles pattern will help you do that easily.

What is NR7?

NR7 stands for Narrow Rage 7 pattern and refers to the candle with the shortest length from top to bottom in the last 7 candles cluster, ie compared to 6 candles before it. This candle signals the possibility of a breakout of the market after a long period of accumulation.

What is NR7?
What is NR7?

If you ask why to choose 7 candles and not 8 or 10, it’s because the cluster of 7 candles gives the highest and correct probability of breaking, similar to NR4 according to statistics from many reputable sources. Therefore, professional traders who trade with Price Action consider the 4 and 7 candlestick clusters as the most worthy signals to trade.

In today’s Price Action strategy, we will talk about NR7 candlesticks to enter orders in line with the trend, taking advantage of the momentum breakouts of the market after a period of accumulation.

Entry rules of the NR7 trading strategy

In this article, the timeframe used for the NR7 trading strategy is the H1 frame. The trading steps according to this strategy are as follows.

Step 1: Wait for the NR7 candle to appear.

Step 2: Open a bullish order if the price breaks the top of NR7 in an uptrend. Open a bearish order if the price breaks the bottom of NR7 in a downtrend.

How to trade with the NR7 strategy
How to trade with the NR7 strategy

Step 3: Set Stop loss right below the bottom of the NR7 candle with bullish order. Or right on top of the NR7 candle with a bearish order.

Step 4: Set take profit at a fixed rate of Risk/Reward or the next resistance level such as support/resistance, trendline, Fibonacci… In addition, traders can also set up trailing stops manually or rely on other technical indicators.

Close the order at the end of the trading day or the close of the daily candle.

For example

The winning order with the NR7 trading strategy in the downtrend.

This is the chart of the EUR/USD currency pair. The blue line is EMA20.

Open a bearish order and win with the NR7 trading strategy
Open a bearish order and win with the NR7 trading strategy

The price fell off the EMA with many consecutive bearish candles

The 6 candles leading to the NR7 candle are all below the EMA, thus satisfying the system’s conditions, showing that the bearish momentum is still maintained. Although the NR7 candle is bullish, it has not reached the EMA yet. We can enter a bearish order when the price breaks the low of the NR7 candle.

After the price dropped beautifully, the market started to retest the breakeven level of the trade. However, the attempt to break the countertrend of this uptrend failed and the price turned down again as soon as it touched the EMA.

The losing order with the NR7 trading strategy in the downtrend.

Open a bearish order and lose with the NR7 trading strategy
Open a bearish order and lose with the NR7 trading strategy

It’s also in the chart of the EUR/USD currency pair. In this example, we will see a failed NR7 setup and analyze why this order was stopped.

The 6 candles leading to NR7 were all below the EMA, so they were eligible to place orders. We entered a bearish order when the price broke the lowest low of NR7. Noticed how the NR7 candle cluster had 3 strong bullish candles but the price couldn’t reach the EMA, showing that the bearish momentum was still strong.

The order was activated, but the market fell into an accumulation state right after that

The order was stopped by an upthrust – a bull trap, then the price continued to move sideways for a long time.

Review of NR7 trading strategy

NR7 and NR4 are both famous patterns widely used in many trading systems by many traders. In the NR7 strategy we’re talking about, we’re looking for strong trends and using NR7 as a pattern to enter orders in the trend.

However, do not follow the rule of entering orders mechanically, the possibility of winning depends a lot on how you evaluate the market at that time. Several NR7 candles appear at the top of an uptrend or the bottom of a downtrend. Those are certainly not nice positions to enter.

Besides, be extremely careful when detecting many NR7 candles in a row. Because then the market falls into a narrow accumulation, and NR7 becomes unreliable. All price action setups are unreliable if they appear in the wrong place.

NR7 looks best when it appears at the end of a correction of a trend.

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NR7 pattern trading strategy to earn profits from momentum breakouts – Part 26
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