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Narrow range bar

A bar whose high-to-low range is the smallest of the last several bars, often preceding a volatility expansion.

NR7 means the narrowest range of the last seven bars; NR4 uses four. The logic is that volatility is mean-reverting: unusually quiet periods tend to be followed by unusually active ones.

Traders use narrow range bars as a signal to prepare rather than to act, setting orders above and below the bar and letting the market pick a direction.

Two cautions. Direction is not predicted, so a two-sided approach or a strong trend bias is needed. And the expansion may come with a fakeout first, taking out one side before running the other. Measuring range relative to atr rather than raw points makes the signal comparable across instruments and over time.

Related: inside-bar, wide-range-bar, atr

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

Educational only, not advice. Spotted an error? Post in Site Feedback.