Crabel NR7 Breakout (XAUUSD)

The story in one line

Toby Crabel’s Narrow-Range-7 breakout — buy/sell the break of the bar with the tightest range of the last seven, stop on the opposite side, 2R target — was run on gold (XAUUSD) over 2017–2026 through a pre-registered 11-gate battery. It passes 4 of 11 gates and ends at $2,523 from a $5,000 start (−50%), profit factor 0.643, Sharpe −0.83, max drawdown −50.5%, positive in only 20% of years.

The interesting part: the compression signal is real. NR7 clears the placebo gate — real PF 0.643 beats the random-permutation 95th percentile of 0.336 (0% of permutations beat it) — and walk-forward out-of-sample holds up against in-sample. The signal carries genuine information; on gold over this window it just doesn’t convert that information into a positive expectancy after costs. Variant retired.

Gate scorecard — 4 / 11

#	Gate	Result	Pass
1	≥ 100 trades/periods	259 trades/periods	✅
2	PF ≥ 1.20 net	PF 0.642	❌
3	Annualized Sharpe ≥ 0.6	Sharpe −0.84	❌
4	Max DD ≤ 12%	MaxDD −50.8%	❌
5	Positive in ≥ 60% of years	20% years positive	❌
6	Block-bootstrap 95% LB Sharpe > 0	95% LB Sharpe −1.38	❌
7	Placebo: real PF > p95	real PF 0.642 vs placebo p95 0.336	✅
8	2× cost stress: PF > 1.0	2x-cost PF 0.526	❌
9	Deflated Sharpe positive	SR_hat −0.84 vs SR0 0.99, DSR=0.000	❌
10	No calendar year > 40% of P/L	max year share 28%	✅
11	Walk-forward OOS PF ≥ 0.9× IS	OOS/IS PF 1.38 (IS 0.60, OOS 0.82)	✅

Gates evaluated on the base pre-registered config (stop = opposite side of the NR7 bar, 2R target, 1% risk at 1R, $0.40/oz round-turn cost). No configuration was selected post-hoc to pass.

Real signal, no profit

The two gates that usually kill a strategy — the placebo and walk-forward checks — both pass here. The placebo is decisive: 0% of random sign-permutations beat the real run, and real PF 0.643 sits well above the placebo 95th percentile of 0.336. Walk-forward is just as clean: OOS PF 0.82 actually exceeds IS PF 0.60 (ratio 1.38), so this is not an overfit in-sample mirage. NR7 compression genuinely marks bars that break with above-random follow-through.

But information is not edge. The same run fails every profitability gate: PF 0.642 (need ≥ 1.20), Sharpe −0.84, max drawdown −50.5%, only 20% of years positive, and a 2× cost-stress PF of 0.526 that collapses further under realistic slippage. The deflated Sharpe is effectively zero. The breakout fires correctly and still loses, because on gold over this window the 2R target and opposite-side stop give back more on the whipsaws than the genuine continuations pay. The signal is real; the net-of-cost expectancy is not.

Verdict: REJECTED (PF 0.643). Do not deploy. NR7 beats random and survives walk-forward — the compression signal carries information — but it is firmly unprofitable net of costs on XAUUSD: Sharpe −0.83, −50.5% drawdown, positive in only 20% of years. The variant is retired.