Breakouts · Intermediate
NR7 and inside day breakout
Volatility moves in cycles. After the narrowest candle of the last seven, a bigger move is likely: trade the break of that candle.
Toby Crabel studied how a day with a narrow range tends to be followed by a wider one. His NR4 (narrowest range of 4 days) and NR7 (of 7 days) patterns, often combined with an inside day, are among the best known volatility-expansion setups.
Why it works
Markets alternate between contraction and expansion. A very narrow candle means buyers and sellers are in temporary balance; when that balance breaks, the energy stored in the quiet period is released.
The narrow candle also gives a precise, small risk: its high and low.
The rules
Setup
- NR7: the current candle has the smallest high-low range of the last 7 candles (NR4: of the last 4).
- Stronger version: the NR7 candle is also an inside bar (its high and low are within the previous candle).
Entry
- Place a buy stop above the NR7 high and a sell stop below its low (an OCO pair: when one triggers, cancel the other).
- Or only take the side of the higher-timeframe trend.
Stop loss
- At the opposite end of the NR7 candle.
Exit and management
- Target at 1–2× the average range (ATR) of the market from the entry.
- If the breakout does not progress within two or three candles, close it.
Filters that improve it
- Avoid NR7 candles right before big news: the breakout can be violent in both directions.
Worked example
Illustrative daily EUR/USD example: the last candle has a 38-pip range, the smallest of seven days, and sits inside the previous candle. Buy stop at 1.0861 (one pip above its high), sell stop at 1.0822 (one pip below its low). The buy triggers, the sell is cancelled, the stop is at 1.0822 (39 pips) and the target at 1.0941 (80 pips, about 1× ATR).
Illustrative numbers, not a recommendation.
Common mistakes
- Leaving both orders active after one triggers, which can double the risk in a whipsaw.
- Expecting a trend after every NR7: the expansion can be one candle long.
How to practise it
Candlemind's advanced ticket supports OCO orders: place a buy stop and a sell stop around a narrow candle and let the market choose. Compare the result with taking only the trend side.
Pre-trade checklist
- Narrowest range of the last 7 (or 4) candles
- Ideally also an inside bar
- Stops on both sides as OCO (or trend side only)
- Stop at the other end of the candle
Frequently asked questions
What does NR7 mean?
Narrow Range 7: the candle with the smallest range of the last seven.
Does NR7 work on intraday charts?
Yes, the principle of contraction followed by expansion works on 1H and 4H charts too, though signals are noisier.