NR7 Trading Strategy — The Narrow Range 7 (Enhanced and Improved Approach)
The NR7 trading strategy is a narrow-range strategy that is both well-known and popular. It is a volatility strategy but enters on a day with a narrow trading range (low volatility). In this post, we backtest the Narrow Range NR7 trading strategy. The strategy works reasonably well, but we improved it by adding one simple parameter.
We made our own version of the NR7 trading strategy and made the following trading rules listed below. We test the following hypothesis on stocks:
The range, or volatility, is the difference between the High and the Low (each day).
If today has the lowest range of the previous last 6 trading days, then we go long at the close.
We exit at the close when today’s close is higher than yesterday’s high.
If we invest 100 000 and let it compound since the inception of the ETF in 1993 we get the equity curve and drawdowns as shown below.
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/nr7-trading-strategy/