NR7 Pattern

 NR7 Pattern

The NR7 pattern, short for "Narrow Range 7," is a technical analysis tool used in trading to identify potential breakout points in price charts. It works based on the idea that periods of low price volatility (narrow range) can be followed by periods of high volatility (breakouts).

Here's how the NR7 pattern works:

  • Identifying the NR7 day: The NR7 day is the day with the smallest price range (high minus low) within a seven day period. So, on any given day, you compare the current price range to the range of the six previous days. If the current range is the smallest, it becomes the NR7 day.
  • Breakout potential: The theory behind the NR7 pattern is that this period of low volatility can represent a build-up of pent-up pressure, which can be released in a subsequent breakout movement. The breakout can occur either upwards or downwards, depending on the overall trend of the market and other technical indicators.

Important things to keep in mind about the NR7 pattern:

  • Not a guaranteed signal: The NR7 pattern is not a foolproof indicator of breakouts. There are many instances where an NR7 day is not followed by a significant move in the price. Therefore, it should be used in conjunction with other technical analysis tools and should not be solely relied upon for trading decisions.
  • Confirmation needed: To increase the reliability of the NR7 pattern, look for confirmation signals such as increased trading volume on the breakout day or a break above/below key resistance/support levels.
  • Context matters: Consider the overall market context and prevailing trends when interpreting the NR7 pattern. An NR7 day in a downtrend is less likely to lead to a bullish breakout compared to one in an uptrend.

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