NR4 Trading Strategy (How To Trade The Narrow Range 4 Bar)

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

Before I get to the trading rules of the narrow range 4 bar trading system, here’s some things that you need to know:

Timeframe to trade: daily preferred

Currency Pairs: Any

Forex Indicators: none required

How To Identify The NR4 Pattern

  1. the narrow range 4 bar pattern is made up of four bars
  2. the most recent bar/candlestick will have a range that is much smaller than the the 3 previous bars.
  3. a breakout happens when price closes above or below the high or low of of the NR4 bar.

NR4 Selling Rules

The best sell setups locations I believe to go short are on using the NR4 bar trading systems are:

  • resistance levels where you see price is showing weakness in momentume and then a narrow range 4 bar forms.
  • price breaks the support levels and goes down and then retraces back to the support level and showns weakness by forming the NR4 bar as shown on the sell setup chart below.

Ok, here are the short trading rules….

  1. identify the narrow range 4 bar on your daily chart
  2. place sell stop pending order 2 pips below the low of the NR4 bar
  3. place your stop loss 2 pips above the high of the NR4 bar.
  4. for take profit, aim for previous swing low price level or aim for a 1:3 risk:reward.

Narrow Range 4 Bar Forex Trading Strategy

NR4 Buying Rules

The best place to use the narrow range 4 bar for buying are:

  • support levels where price is showing downward weakness by forming the NR4 bar like shown on the chart below.

The buy setup for the narrow range 4 bar are exact opposite of the sell setup you’ve read above:

  1. identify the narrow range 4 bar on your daily chart
  2. place a buy stop pending order 2 pips above the high of the NR4 bar
  3. place your stop loss 2 pips below the low of the NR4 bar.
  4. for take profit, aim for previous swing high price level or 1:3 risk:reward.

NR4 Forex Trading Strategy

Disadvantages of the NR4 Bar Forex Trading System

  • as with all forex trading strategies, every system has it weaknesses. There will be times when there will be false signals, when you will see price active your pending order and you think a breakout has happened but than it reverses and will take out your stop loss. Such is the nature of forex market and expect that to happen.
  • there is not clear and fast rules about how narrow the the NR4 bar should be. Its a visual thing…and this may sometimes cause a few issues for new traders and you can miss excellent trading setups that form.

Advantages of the NR4 Bar Forex Trading Strategy

  • a simple price action trading setup
  • it can be a set and forget kind of system
  • you only need a few minutes a day to check if a setup has formed or not an place your pending order and walk away.
  • this system has the potential to make you stop over trading…less is more in trading, they say.
  • stop loss is tight and that increases your risk to reward greatly when the trade goes as planned.
  • trading on the daily chart means that profit potential of this system is not on 10 of pips but 100-300 or even more and that depends on how strong the market trend is as well as how strong your never is to let your profit run and not exit too early.

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