The NR4 trading strategy is a price action trading system which is based on today’s high to low price range that must be narrower than the previous 3 days. 

Timeframes : Preferable daily

Instrument : Any

 Indicators : Not required

Identifying the NR4 Pattern:

• The NR4 (Narrow Range 4) pattern is made up of four candlestick.
• The last candlestick must have a range that is smaller than the 3 previous candlesticks.
• A breakout forms when price closes above or below the high or low of the NR4 candlestick.

NR4 Short Trade Setup Rules:

The best sell setups locations to go short are:

• Resistance levels where price is showing weakness in momentum and then there is a formation of narrow range 4 candlestick
• Then the Price breaks the support levels and goes down and then retraces back to the support level and shown weakness by forming the NR4 candlestick as shown on the sell setup chart below.

Trading rules for short entries:

• First identify the narrow range 4 candlestick on daily chart
• Then place sell stop pending order 2 pips below the low of the NR4 candlestick
• And then place stop loss 2 pips above the high of the NR4 candlestick.
• For take profit, set at 1:3 risk: reward ratio or aim for previous swing low price level.

Let us explain with a chart below:

NR4 Long Trade Setup Rules:

The best place buy setup rules are:

Support levels where price is showing downward weakness by forming the NR4 candlestick like shown on the chart below.

Long Trading Rules:

• First Identify the narrow range 4 candlestick on daily chart
• Then place a buy stop pending order 2 pips above the high of the NR4 candlestick
• And then place stop loss 2 pips below the low of the NR4 candlestick.
• For take profit, set at 1:3 risk : reward Or aim for previous swing high price level.

Let us explain with a chart below:

Pros :

• Very simple price action trading strategy.
• You can just set and forget about it.
• Will help in avoiding overtrading.
• Easy to follow as will need only a few minutes a day to check if a setup has formed or not and place pending order.
• Trading on the daily chart means that profit potential of this system is not on 10 of pips but by 100-300 or even more and that depends on how strong the market trend is going.

Cons :

• As with all trading strategies, every system has it weaknesses. There will be times when there will be false signals, when we will see price active pending order and we think a breakout has happened but then it reverses and will take out our stop loss. Such is the nature of market.
• There is a not clear and fast rule about how narrow the NR4 candlestick should be. It’s a visual thing and this may sometime cause a few issues for new traders and we can miss excellent trading setups that form.