Trading NR7 setup

[WOD]

My views on this discussion -


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On hrly chart the pattern took 15+ bars to make it..and if it couldn't last even 1/2 of those many bars.



IMO, events act as catalyst to price move. On charts, 4500 was anyway a resistence level. It took many bars to fall from there too 4250 level..but budget frenzy took just 5 bars to go back to same resistence
level and finally Resistence zone did what they are supposed to do... i.e. act as resistence and push the prices down..
Impatience traders / or traders who go by the rule book, find it difficult to handle..whereas if we give time to the price action to develop, the picture becomes quite clear..


If you go by the budget day and price action post budget day.. (Sunil has posted outstanding analysis on that in seperate thread of budget weekend).. two messages were pretty clear
1) Budget days have wide range..
2) Market falls after budget in more then 80% of the time.

This time again, price action just repeated the history (no brainer for person who trusts the chart ).
I will consider budget as earthquack event.. but they are predictable as we know when they are coming.. (known devil is easier to handle then unknowns)


We all may have different way to trade same pattern due to our own approach. Even if someone has gone long on ascending triangle breakout.. the initial stop would have been in the triangle zone (base or upward sloping line or projected apex of triangle).. It the stops were not moved to breakeven then still the trade would have been closed on Monday when market dropped below the stoplevel.

Starting short trade is just another trade. Some may consider triangle breakout as false breakout (price could not hold above breakout level for sufficient #of bars), or can call it double top at 4500 level, or reversal from right shoulder of H&S pattern there or divergence on the oscillators. All depends on what we want to see on the chart.. None of the approach or logic is wrong.

Hope we are enjoying the breakdown..

Happy Trading.

AW, do you still think breakdown started on B day is still intact?

Till yesterday I had the same opinion that breakdwon is intact but now even now my belief has started fading (4140 region has been convincingly taken out).....

Can you throw some light why you still think breakdwon is intact?

Thanks......

 

[lazytrader]

Finally everyone would agree that what matters is not how you interpret news, charts etc but how your trade...

It's not how much you know about the market but how well you can trade with what you know...

Don't be discouraged when you hear about complex explanations because even the most experienced TA's suffer losses simply means that no one can tell the future no matter what and how much of it you know.

We are going to see narrow ranges soon so hopefully we can go back to what the thread was started for.

 

[lazytrader]

AW, do you still think breakdown started on B day is still intact?

Till yesterday I had the same opinion that breakdwon is intact but now even now my belief has started fading (4140 region has been convincingly taken out).....

Can you throw some light why you still think breakdwon is intact?

Thanks......

I know what you are doing. I was doing it too. I keep a SL then when it is reached I don't close my position and look for reasons why the market may go in my favour. Your SL was 4140 if I am not wrong. we've hit 4200 once we break above it you have to make the tough choice buddy.

The reason you have to make a tough choice because you didn't make the easier one at 4140. Wait for 4200 to be broken and sustain above it for 5mins then you know it's your choice to make...

 

[WOD]

I know what you are doing. I was doing it too. I keep a SL then when it is reached I don't close my position and look for reasons why the market may go in my favour. Your SL was 4140 if I am not wrong. we've hit 4200 once we break above it you have to make the tough choice buddy.

The reason you have to make a tough choice because you didn't make the easier one at 4140. Wait for 4200 to be broken and sustain above it for 5mins then you know it's your choice to make...

I made tough one.....

 

[Shreenath]

My two cents on NR7s, ID/NR4s, Double NR7s

Hello Satyen and Lazy Trader,
Was going through these posts and thought I could post my experiences.

1. Crable's patterns do work very well; which's why he didnt republish his original book(first print was 2000 copies; now an original is a collectors item costing in 100s of dollars and less if you are lucky). I heard he runs a hedge fund worth Billions. I remember hearing in one of Linda's(LBR) long ago that his average profit per trade for his hedgefund was 17 bucks. Obviously one must learn how to build the number of contracts traded without sacrificing risk.

2. I use NR7s, double NR7s, ID/NR4s as a filter in that at the end of the day if my daily data alerts me to these situations, the next day I switch to breakout mode. All these things are old hat, mentioned so well by Linda in her book Street Smarts. I also use historical volatility ratios to filter those issues that are contracting in range. Why trade something where there's nothing going on?

3. You can trade breakouts in any time frames and all these patterns work in any time frame. One of the best methods to trade breakouts is to figure out the critical range and then add a percent to it and this could change based on volatility of the markets.

4. I love double Nr7s. Sometimes you don't get a breakout after the first NR7 but the next day you get another NR7. This happens but only a few times for say bonds or s&P(dont know for Nifty yet) in a year but when it happens it could lead to explosive moves lasting a few days on the daily chart.

Once range expands, say a big breaktout, then I switch back to swing trading. If I get a wide range 9(widest range for the past 9 days) or a break out in general the next day I switch to Zzzzz mode(not much happening here)so basically try to pick the intraday high and low and maybe take one trade on both sides(support and resistance).

Thanks so much
Shreenath

 

[AW10]

AW, do you still think breakdown started on B day is still intact?

Till yesterday I had the same opinion that breakdwon is intact but now even now my belief has started fading (4140 region has been convincingly taken out).....

Can you throw some light why you still think breakdwon is intact?

Thanks......

After the breakout, market can not go indefinitely in one direction. It has travelled 550 pts (12-13%). How much more you would expect it to travel in one wave ?
It is quite obvious that it will find support somewhere / shorts will start booking profits and we will see the reversal.

As a trader, we can't live with fixed view about the market. We got to make an opinion based on our defined method. Then keep validating if the factors are still intact.
It is important to define our own parameters to identify the trend reversal.

As a trader, we need at the minimum
1) tool set to identify the current trend (up/down/sideway).
2) toolset to identify the end of trend
3) toolset to identify the reversal of trend

It needs to put your thoughts in proper order. You can extend the approach and also start looking a confirmation signals for each of the three points.
Try to keep this simple and avoid getting into analysis - paralysis while doing this.

Take an example -
1) NR7 give us a trigger that new trend is going to start. So we get ready and start watching for entry signal
2) Next day market breaksout and depending on the direction we know that new trends has started.
3) As an example, Lets follow 3 moving averages (3bar/ 5bar/13bar) to guide us as long as trend is in place or not. As long as they are nicely arranged, we are in trend.
4) Lets use same 3 averages to show us end of trend - when we see 3 bar MA changeing direction and penetrating 5bar MA, we know the market is telling us something.
What action to take, depends on individual. Some will book profit on first sign of weakness. Some will wait for 10 more confirmations before changing their view that market has
reversed. Some will just tighten the stops.
5) To confirm the reversal, you might like to see, 1 Higher Low pivot as first signal. For confirmation of reversal, u might like to see the break of downward sloping Trendline.

These are just an example to get u thinking. Please spend some time and define your indicators / signal / market pattern etc and then just watchout for it.

In my view, we have retraced 63% of the move that started from 3500 level to 4700 level. (1200 pts move, 63% gives approx 750 pts . i.e. from 4700 we came down by 750 pts).
Typical fib level where mkt finds support. Various 50/ 200 dma lines are also in the same zone. 4000 is nice psychological support level.
all these factors makes 4000 an important support level which it did nicely.

Generally when we look at big timeframe charts, we need to see the number of bars market has spent below/above a level. In current case, mkt just spent 1 day (friday) below 4000 and bounced back from there. That too was a narrow range day of 85 points. Though it did not flag as NR7 day because of previous days action.. but if we observe the daily range closely, then in my observation, I have found all days with less then 100 pts range (i.e. 2.5% to 2.8% of current price) act as narrow days. and they indicate possible breakout.
And we see the result now.

Hope this helps.

Happy Trading.

 

[Shreenath]

AW10
Nice spreadsheet to track NR7s. It's cheap and its free......

I tend to use it on TS charting and simply look at it on a chart using a paintbar. I do the same thing for ID/NR4 and WR9s.

There must be someone who might have written codes for platforms that allow us to trade Indian stocks.....

Regards
Shreenath

It is pretty easy to do this in excel with simple formulas. I am attaching the file with this post.


I have used it on NIFTY. It does work well on lower volatility instrument /chart timeframe..
In case of high volatility stocks, u might have many Outside day taking away the stops on the day of entry. For such stocks, I will look at higher timeframe so that charts are bit more smooth (say weekly chart),
But the concept of market going thru contraction / expansion is universal. I have observed this pattern on all charts ranging from other global indices to commodities and forex.
It doesn't suit smaller timeframe (say 5min, 15 min) because charts are not so smooth and it is easy to get false wicks on candle there.



In case of failed trade (i.e. in the morning, NR7 Low was broken on downside, and later the NR7 was taken away.
This is classical care of engulfing day.. and certainly, I will play with second break.

In this post, I have mentioned about how to play the breakout.
http://www.traderji.com/technical-analysis/27956-scalping-strategies-2.html#post307876


Backtesting comes up only when we define the complete system rules around it. I have my system around this. Would prefer to develop new system by involving TJ member rather then giving my system here (I strong belive in "teach a man to fish.. ").


Buy in cash on 3.15 pm on NR7 is risky.. cause u don't know the direction of breakout. By buying, u are anticipating that it is going to be bullish break tomorrow. In many cases, market can make runaway gap after such strong contraction.

I am not in favour of such trading (my personal choice). That is why I suggested this 3.15 pm approach with direction neutral option strategy.
If someone wants this, or u have other signals that support bullish trend tomorrow then one can take that call.



Thanks a lot for volunteering. Bandlab2. Sincerely appreciate it.
Keep posting your doubt/questions here so that others can also benefit from it.
Others, don't leave everything to bandlab and me but jump-in and benefit from this. Probably, you won't find the kind of learning that this system development will give you here. If someone wants, then this testing can be taken up for stocks, commodity, Sector indices etc.

This setup occurs approximately 2 to 3 times in a month on NIFTY but it is worth trading.


There are many different ways to chase a trend with trailing stoploss. For a daytrader this could be based on pivot high/low at 60min TF on day 1 but start tightening on day 2 or later to 30min PH/PL.
For swing trader, Prev days / H/L is good and simple enough.

In my view, when we use trailing stoploss, we leave some profit on the table. And all of us have different psychological preference for that. So there is no 1 answer for this.
Personally, I don't like to cut my profit so not in favour of closing all breakout trades quickly . At the same time, there is expected gain in our trading timeframe where I would like to take take partial profit or lock profit by using options.

Happy Trading.

 

[myvineet]

Thanks ........this shows how little i know and confined to some perticular logic of triangle.. Any way thanks again

same feeling came to my mind whenever i read AW, saint & ST's posts..

but feeling happy that atleast we got where we want to reach..

right satya...

 

[Shreenath]

AW10,
Was going through your posts again on Nr7.

Have you done similar work on ID/NR4s?

If you are interested we could work together on developing a system to trade the breakouts for both NR7s and ID/NR4s. I know you already have yours but since you have extended an offer to learners here, I thought I could learn from what you do.

I have used these only as filters to switch to breakout mode while trading US Markets. I already have the indicators on tradestation so I could get started quickly.

Eventually I would be interested to trade the Nifty which I intend to within a month of so. I've also learnt to import EOD data for NIfty to TS but am wondering whether it would work for intraday....once that happens I can post my alerts here for everyone....

Let me know when we can get started and hopefully other members interested will join me in this learning journey.

Warm Regards
Shreenath

After the breakout, market can not go indefinitely in one direction. It has travelled 550 pts (12-13%). How much more you would expect it to travel in one wave ?
It is quite obvious that it will find support somewhere / shorts will start booking profits and we will see the reversal.

As a trader, we can't live with fixed view about the market. We got to make an opinion based on our defined method. Then keep validating if the factors are still intact.
It is important to define our own parameters to identify the trend reversal.

As a trader, we need at the minimum
1) tool set to identify the current trend (up/down/sideway).
2) toolset to identify the end of trend
3) toolset to identify the reversal of trend

It needs to put your thoughts in proper order. You can extend the approach and also start looking a confirmation signals for each of the three points.
Try to keep this simple and avoid getting into analysis - paralysis while doing this.

Take an example -
1) NR7 give us a trigger that new trend is going to start. So we get ready and start watching for entry signal
2) Next day market breaksout and depending on the direction we know that new trends has started.
3) As an example, Lets follow 3 moving averages (3bar/ 5bar/13bar) to guide us as long as trend is in place or not. As long as they are nicely arranged, we are in trend.
4) Lets use same 3 averages to show us end of trend - when we see 3 bar MA changeing direction and penetrating 5bar MA, we know the market is telling us something.
What action to take, depends on individual. Some will book profit on first sign of weakness. Some will wait for 10 more confirmations before changing their view that market has
reversed. Some will just tighten the stops.
5) To confirm the reversal, you might like to see, 1 Higher Low pivot as first signal. For confirmation of reversal, u might like to see the break of downward sloping Trendline.

These are just an example to get u thinking. Please spend some time and define your indicators / signal / market pattern etc and then just watchout for it.

In my view, we have retraced 63% of the move that started from 3500 level to 4700 level. (1200 pts move, 63% gives approx 750 pts . i.e. from 4700 we came down by 750 pts).
Typical fib level where mkt finds support. Various 50/ 200 dma lines are also in the same zone. 4000 is nice psychological support level.
all these factors makes 4000 an important support level which it did nicely.

Generally when we look at big timeframe charts, we need to see the number of bars market has spent below/above a level. In current case, mkt just spent 1 day (friday) below 4000 and bounced back from there. That too was a narrow range day of 85 points. Though it did not flag as NR7 day because of previous days action.. but if we observe the daily range closely, then in my observation, I have found all days with less then 100 pts range (i.e. 2.5% to 2.8% of current price) act as narrow days. and they indicate possible breakout.
And we see the result now.

Hope this helps.

Happy Trading.

 

[Satyen]

same feeling came to my mind whenever i read AW, saint & ST's posts..

but feeling happy that atleast we got where we want to reach..

right satya...

Yes Very Right Vineet Bhai .......... Just amzing yes we need these people to pull us upwards