Again, this is very short-term-oriented and might not be suitable for all traders.
It occurs when the next day is also shorter than any of the prior seven. The chart pattern indicator uses the narrow range 7 chart pattern to signal market turns.
It does this not by trading in the direction of price after the pattern completes, but instead it looks for the breakout.
Patternz defines the breakout as a close above the top of the pattern or a close below the bottom of the pattern. The top and bottom use the seven days, from start to end, of the NR7. Since the breakout method works so well for the chart pattern indicator, it might be used to effectively trade the NR7 pattern. If it isn't broke, fix it until it is. See the glossary for definitions. Subscribe to RSS feeds. He may be reached at Support this site! The most recent bar must have a smaller high-low price range than the prior six bars seven bars, total.
Another method is to use the last day of the NR7 as a trading signal. A close above the top of the last day, or below the bottom of it may suggest the trend direction.
Ride price following the new trend until the swing ends. And yes it works good for al liquid and high beta stocks. Hi Admin, Thanks for the excellent code. Backtested using 5min and hourly timeframes, it shows good performance , but some wrong cover signals , can you add the box at the bottom which shows a buy price and stoploss price.
Thanks for the response…Could you tell me what changes should I make in the existing code if; 1 I want to test it on basket of liquid stocks,i. You are doing great job by providing the information about trading systems. It will be a great help for people with no programming background. You would definitely get answers to these questions.
If you fail somewhere, we are there to help. And yes we would plan for Amibroker sessions soon. A big thanks for this strategy. I have few questions: Since we have to go long on gap up it means we have to sit in front of our system every day at Will it be possible to get list of NR7 candle formed stocks a day before? I want to trade in equity and want some settings like always by stock with Rs 1 Lac capital.
Then simulate the afl for net profit on yearly basis. A small exploration code would do it. See the NR7 variable and add it to the exploration code. Thanks a lot for your reply.
I heard about Amibroker but you have ignited the passion deep inside me. Thanks your wonderful website. How can I use trailing stop loss feature rather than using fixed target in NR7 afl. Please check out this other AFL where we have used Trailing stop loss. So backtest is a failure. And since open cannot change, this backtest is perfectly correct.
Admin afl is incorrect, look in to the future beware, definition of gapup and gapdown need the completation of bar and you enter at open yes next day of nr7 but same day of gap, so correct is: Please let me know if you have any more queries. Buy Open but second condition met at the end of the day , so AB selectively shows only those cases when at the end of the day gap stays open. I had made several backtests with the AFL provided and found then correctly coded and working perfectly.
Total Trades Trailing SL with percentage of profit 0 10 20 Hi admin i repeat your code is wrog, this is how amibroker intend gap and is not like investopedia: Amibroker has a very goofed up definition for gaps which caused this confusion.
Setting trade delays to 1 will solve the issue without any code change. Conversely, a move above the high of the narrow range day would negate a sell signal. Chartists also need to consider profit targets and stop-losses.
Crabel took profits quite quickly, usually at the close of the first trading day or on the first profitable close. Again, this is very short-term-oriented and might not be suitable for all traders. Alternatively, profits can be taken near the next resistance levels or a percentage target can be used. For example, the stop-loss on a long position could be set two Average True Range values below current prices and trailed higher.
The trading example shows Morgan Stanley with twelve signals in less than three months. The blue arrows show the NR7 candlesticks and the thin blue lines mark the high-low of the range. A next day move above the high is bullish, while a next day move below the low is bearish.
Notice that NR7 days formed back-to-back on three different occasions. While not always the case, these back-to-back NR7 days did not result in different signals, they simply affirm the existing signal from the prior NR7 breakout.
With nine signals in total, traders could have to watch price action close, exercise judgment, and manage stops. However, it is possible to scan for NR4 or NR7 days using the Advanced Scan Workbench to write the code, an example of which is provided in the next section. More importantly, the Average True Range does show when the range is contracting or expanding.
Most chartists will want to qualify NR7 signals because they are quite frequent. A typical stock will produce dozens of NR7 days in a twelve month period and a daily scan of US stocks will often return hundreds of stocks with NR7 days. Chartists can increase or decrease the number of narrow range periods to affect the results.
A decrease from NR7 to NR4 would increase the number of stocks fitting the criteria, while an increase from NR7 to NR20 would decrease the number of candidates.