Narrow-range breakout

A narrow-range day, often NR7, is a session whose high-low range is the smallest of the last several sessions. Toby Crabel popularized trading the break of that compression. The bet is that a market that has stopped moving is storing a move, not that the direction is known in advance.

Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.

Rules

Mark an NR7 when today's range is the narrowest of seven sessions. Buy a break of the NR7 high or sell a break of the NR7 low, often on the next session. Cancel the other side once one side fills. Exit at the close, at a multiple of the NR7 range, or at the following day's opposite extreme. Skip the pattern into a scheduled announcement if the gap will skip the stop.

Where AI fits

AI can label NR4, NR7, and inside-day variants as separate systems so the best-looking label is not chosen after the fact. It can add a trend filter and report whether direction then comes from the filter rather than from the narrow bar. Cost assumptions matter because the target is often one day.

Markets

Liquid futures and stocks with a continuous session. Wide overnight gaps change the payoff.

Timeframes

Daily bars to define the pattern. The break is usually traded the next day.

Risks

Compression can resolve with another quiet day. The first break is often faded. A seven-bar window is a convention, and testing every window from 2 to 20 will find a winner by chance. Gaps through the narrow range make the stop theoretical.

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