Guide to the Narrow Range 4 Bar Strategy

The Narrow Range 4-bar Strategy may lead to 100 pips gain or more. You can chase profit as high as prices go with this kind of swing trading strategy.

Is there any simple swing trading strategy? Beginners are looking for accurate and profitable forex trading strategies everywhere, but many of them tend to choose the most complicated ones. In fact, you don't need an intricate approach to gain meaningful profits. Some simple plans are enough, such as the Narrow Range 4-bar Strategy.

The Narrow Range 4-bar Strategy is a straightforward price action trading setup based on the candlestick chart in the Daily timeframe. It doesn't require additional technical indicators, although you may add them later.

The Narrow Range 4-bar Strategy can be applied to any forex pair. However, it must fulfill one basic requirement: there is a Narrow Range 4-bar Pattern on the chart.

The Narrow Range 4-bar Pattern characteristics are:

1. It consists of four candles.
2. The most recent candlestick (high-to-low price range) is smaller than the previous three candles.

Afterward, we can spot buy/sell opportunities by taking advantage of breakouts that happen below the pattern's low or above the pattern's high.
See the following examples to get it right.

Setup for a Long Opportunity

We can find the finest buy signal by looking at the support levels where prices are exhibiting downward weakness by producing a Narrow Range 4-bar Pattern, as seen on the chart below. We can see that although prices are in downward weakness, there are sufficient buying pressures because the price chart shows a budding bullish trend (higher lows) and the last candle in the pattern has a long tail.

After spotting the pattern on the chart, set a buy stop pending order at 2 pips above the high of the fourth candle in the pattern. Place a stop loss order at 2 pips below the low of the fourth candle in the pattern. Lastly, set your target profit at the same level as the previous high or in accordance with your own risk/reward ratio.

Setup for Short Opportunity

We can find the best sell signal by looking at the resistance levels where prices are exhibiting downward weakness by producing a Narrow Range 4-bar Pattern, as seen on the chart below. There is significant selling pressure in the first three candles. Although selling pressure has slowed down in the fourth candle, it is possible that accelerated downward momentum will lead to the breakdown of the last candle's low.

After spotting the pattern on the chart, we can take advantage of the budding bearish trend by placing a sell stop pending order at 2 pips below the fourth candle on the pattern. Set your stop loss order at 2 pips above the high of the fourth candle in the pattern, and take profit at the same level as the previous low or in accordance with your own risk/reward ratio.

Is Narrow Range 4-bar Strategy Suitable for You?

At first glance, the Narrow Range 4-bar Trading Strategy is quite similar to how we usually trade the Three White Soldiers and Three Black Crows patterns. But this strategy may be easier to understand for beginners.

You don't need to set up any kind of confusing indicator. It doesn't require you to monitor price changes all the time, so you can simply look at the candlestick chart every once in a while to see whether a trading opportunity appears.

Best of all, you can chase profit as high as prices go with this kind of swing trading strategy. It is even possible to gain more than 100 pips in one entry. The Narrow Range 4-bar Pattern is quite rare too, so you will not be overtrading any time soon.

On the other hand, this strategy is prone to false signals. Prices may break down or break out and then reverse to meet your stop loss order. Therefore, you should not bet all your money on one trading opportunity. If you intend to open only one position at a time, then you could bet at most 5% of your funds.