What does it look like?
This bar pattern requires seven bars. If the last bar has the smallest bar range within the sequence, it is an NR7 pattern.
To clarify, bar range refers to the difference between the high and the low of a bar.
What does it mean?
Like the inside bar, it indicates decreasing volatility.
As the lower volatility comes within the context of seven bars, instead of a single bar like in the case of an inside bar, the NR7 pattern is a stronger sign of decreasing volatility.
However, while the inside bar shows no strength in either direction, the NR7 pattern might drift upwards or downwards. In such cases, the NR7 represents a price thrust with decreasing volatility.
As the market alternates between range contraction and range expansion, the NR7 alerts us to standby for explosive moves.
How do we trade it?
- Buy break-out of the high of the last bar if the trend is up
- Sell break-out of the low of the last bar if the trend is down
Read: NR7 Trading Strategy