An NR4 is a trading day with the narrowest daily range of the last four days. An inside day has a higher low than the previous day's low and a lower high than the previous day's high. Combining the two conditions sets up an ID/NR4 day. Crabel's initial approach suggested a day-trading strategy following this setup. In the breakout mode we can't predict the direction in which we are going to enter the trade. All we can do is predict that there should be an expansion in volatility. Therefore, we must place both a buy-stop and a sell-stop in the market at the same time. The price movement will then pull us into the trade.
Here are the rules:
1. Identify an ID/NR4.
2. The next day only, place a buy-stop one tick above and a sell-stop one tick below the
ID/NR4 bar.
3. On entry day only, if we are filled on the buy side, enter an additional sell-stop one tick below the ID/NR4 bar. This means that if the trade is a loser, not only will we get stopped out with a loss, we will reverse and go short. (The rule is reversed if initially filled on the short side.)
4. Trail a stop to lock in accrued profits.
5. If the position is not profitable within two days and you have not been stopped out, exit the trade MOC (market on close.) Our experience has taught us that when the setup works, it is usually profitable immediately.
The above write-up is taken from the book “ Street Smarts by Raschke and Connors”
PS: If u observe the chart above, most of the NR4’s are in reality NR7’s so a more violent move???
No comments:
Post a Comment