Average Daily Range ( ADR )

If you are day trading, then it's always a good idea to be fully aware of the average daily range of the pairs you are trading. This is because you always want to know how much further a pair could realistically move given it's daily average in order to determine where you should set your stop loss and target price.

For instance if a pair has an average daily range of  200 points and during a given day it has been trading in a range of 200 points or more (and is trading at the top of this range with just an hour or so left), then you obviously would not want to be opening a long position because the odds are very much against you.

However if, for example, the range is currently 50 points and there is several hours left of the trading session, then a long position at the top of the range might be worth considering given the right circumstances because there is still room for a decent price move to take place.

Best Regards,


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