NR7 – Volatility Contraction and Breakout with Candlestick Confirmation

1. Definition of NR7

NR7 (Narrow Range 7) is part of the Narrow Range family introduced by Tony Crabel. Simply put, an NR7 bar is a candle whose range (High - Low) is the smallest of the last 7 consecutive bars. This indicates a strong volatility contraction that often precedes a sharp breakout.

Key characteristics:

2. How to Identify NR7

Follow these steps:

Below is a typical NR7 illustration:

3. How to Trade NR7

Step 1: Wait for the NR7 candle to close. If it is still forming, the range is not final.

Step 2: Determine the breakout direction. There are two approaches:

Step 3: Enter the trade:

If using candlestick confirmation, prefer reversal patterns such as bullish/bearish engulfing or pin bars at the breakout area.

Example of an NR7 breakout with confirmation:

4. Real Example

On the EUR/USD H4 chart, the last 7 bars have ranges of 45, 50, 38, 42, 30, 35, 40 pips. The smallest is 30 pips (bar 5), and the current bar stays within that zone, forming an NR7. The next bar posts a bullish engulfing and closes above the NR7 high. A trader enters long with a stop below the NR7 low. Price advances 60 pips, equal to the recent average swing.

5. Common Mistakes to Avoid