How to trade NR7 and Inside Day Pattern on $SPY

How to trade NR7 and Inside Day Pattern on $SPY

$SPY NR7ID pattern stock chart

NR7 Inside Price Pattern Definitions:

Narrow Range 7 : or simply an NR7 day is a basic price pattern which simply means that we had the trading day in which the range is narrower than any of the previous six days.

Narrow range patterns come from Toby Crabel book, “Day Trading with Short Term Price Patterns & Opening Range Breakout” Toby Crabel is the founder of Crabel Capital Management, LLC , currently has over $1 billion in assets under management.

Inside Day: or simply ID is a day , where the high of the current day is lower than the high of the previous day and the low of the current day is higher than the low of the previous day.

Narrow Range 7 Inside Day  : or simply NR7ID is a cocktail made out of combining an ID and an NR7.

With $SPY forming an NR7ID as on 16 Jan 2014 close ,

below the two possible scenarios which are written in multiple trading text books

1) Go long above previous day’s high after an NR7ID pattern 

go long above  previous day’s high (184.66, for 17th Jan 2014) , only if it trades there  ( which means the previous day’s high must be in between , the current day’s high and low , why ? on a full gap up day ( when the current low is higher than prev high) , assuming one puts a buy stop tick above previous day’s high order , the order won’t be executed , right ??

below the trading odds for “going long above previous day’s high after an NR7ID pattern ” since Jan 2000

  • Total Trades : 71
  • Winners : 38
  • Losers : 33
  • % Winners : 54%
  • Average Change % : -0.05
  • Median Change % : 0.09
  • Maximum Gain % : 2.77
  • Maximum Loss % : -3.54
  • Average Gain %if Winner : 0.52
  • Average Loss % if Loser : -0.70
  • Payoff Ratio 0.75
  • Profit Factor : 0.79
  • Outlier Adjusted Profit Factor : 0.69

Doesn’t work like what was written in trading text books ! besides it is a loss making strategy !!

2) Go short below previous day’s low after an NR7ID pattern 

go short at previous day’s low  (183.83 , for 17th Jan 2014 ) , only if it trades there  ( which means the previous day’s low must be in between , the current day’s high and low , why ? on a full gap down day ( when the current high is less than prev low) , assuming one puts a sell short one tick below previous day’s low limit order , the order won’t be executed .)

  • Total Trades : 71
  • Winners : 44
  • Losers : 27
  • % Winners : 62%
  • Average Change % : 0.27
  • Median Change % : -0.13
  • Maximum Gain % : 4.81
  • Maximum Loss % : -2.42
  • Average Gain %if Winner : 0.74
  • Average Loss % if Loser : -0.51
  • Payoff Ratio 1.46
  • Profit Factor : 2.62
  • Outlier Adjusted Profit Factor : 2.29

look ohk ! for trading strategy to go short on $SPY , but few tweaks like when the previous day’s close is below 200-DMA, 20-DMA ( which are not the case as on 16 Jan 2014 close ) , will enhance the trading strategy perfromance …

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