NR4/NR7 Volatility Squeeze & Breakouts

NR4/NR7 Volatility Squeeze & Breakouts

Concept

Markets often move in cycles of contraction → expansion.
The NR4 and NR7 patterns are well-known volatility contraction signals:
• NR4: The current bar has the narrowest range (high–low) of the last 4 bars.
• NR7: The current bar has the narrowest range of the last 7 bars.
• When both conditions align, it signals a strong volatility squeeze.
Such bars often precede sharp breakout moves, making them valuable for breakout and risk-framed trading setups.

How It Works

This script detects NR4 and NR7 bars in real time and adds several features for practical trading use:
Bar Highlighting:
• Teal = NR4, Purple = NR7, Orange = Both.
Breakout Levels:
• The High and Low of the most recent NR bar are projected forward as breakout bands.
Breakout Signals:
• Optional markers when price crosses above/below the NR High/Low.
• Configurable “close confirmation” and cooldown period to avoid duplicate signals.
SMA Filter (adjustable, default 20):
• Plotted on the chart to help traders frame bias and trend context.
Alerts:
• “NR Bar Formed”
• “Bullish Breakout”
• “Bearish Breakout”

How to Use
1. Identify Contraction:
• Watch for NR4/NR7 colored bars.
2. Plan Expansion:
• Use the High/Low of the bar as breakout reference.
3. Add Filters:
• SMA slope/position can add directional context.
• Combine with volume, VWAP, or support/resistance for stronger signals.
4. Risk Management:
• Many traders use the opposite side of the NR bar as stop placement.

Why It’s Useful

Unlike generic breakout systems, this script:
• Focuses on specific, researched volatility patterns (NR4/NR7), not just random breakouts.
• Provides a visual and systematic framework for detecting contraction → expansion phases.
• Integrates both classic price-action logic (narrow ranges) and a trend filter (SMA).
• Offers flexible alerts and cooldown so traders can adapt it to different styles (scalping, swing, intraday).

Important

This is an educational tool. It does not guarantee profitable trades. Always combine with your own market analysis and risk management.