How to Use - "Volatility Squeeze (NR4/NR7) in Action"

Overview

The NR4/NR7 Volatility Squeeze & Breakouts indicator highlights narrow range bars (the tightest candles in the last 4 or 7 bars).
These patterns often signal price contraction before an expansion move.

Performance Snapshot from the Chart
• Multiple NR4/NR7 labels appeared during sideways phases, correctly highlighting compression zones.
• Breakouts above/below the marked levels often triggered short directional bursts.
• The final cluster near the right edge (orange NR bar) preceded a sharp downside breakout, confirmed by both price and volume.
• The 20-period SMA acted as a bias filter:
• Breakouts below the SMA during the downtrend aligned with stronger moves.
• Breakouts against the SMA were generally weaker or faded quickly.


Key Observations
1. Clustering of NR Bars:
• When NR4/NR7 patterns cluster together, it often signals that a bigger move is loading.
2. Breakout Triggers:
• The High/Low of the NR bar served as clean breakout reference levels.
3. Volume Confirmation:
• Strong moves (especially the last breakdown) came with spikes in volume, adding conviction.

How Traders Can Use This
• Identify Volatility Contraction: Spot NR4/NR7 bars as potential setups.
• Set Levels: Use NR High/Low for breakout triggers.
• Add Filters: Combine with trend (SMA), volume, or support/resistance for stronger conviction.
• Risk Management: Opposite side of the NR bar can serve as a logical stop level.