The Average Daily Range (ADR) is used to determine the range of trades for the day. However, this calculation can be lengthy as quick decisions must be made. The Average Daily Range indicator assists traders in calculating the range for the day, thus making it easier to calculate the daily range.
ADR: The Average Daily Range (ADR) indicator shows the average pip level of a currency pair over a 14-day period. By displaying the day’s trading range, Forex traders can get an idea of the volatility the market is in.
The average of the day can be seen in this indicator located on the left side of the chart, as shown below.
If it’s an ADR value above the average range that indicates high volatility for the day. Therefore, when the ADR value is greater than the value of the last 14 days, the movement of the pair spikes.
This indicator is able to determine daily support and resistance zones. In addition, the indicator can be used to create signals for traders trading on a short-term basis. In addition, traders are able to use ADR pip values to determine their profit taking levels.
This indicator can also be useful for intraday traders. When the price is at the top of the day’s range, traders are looking for a breakout or reversal.
How to Determine the Value of the Daily Average Range
This indicator determines the ADR value. It calculates the ADR value by calculating the distance between the lowest points in 14 days, adding the two together, and dividing the result by 14.
What is the best way to trade using the Daily Average Range indicator?
This indicator is a good tool for trading between ranges as well as breakouts. A breakout trade is executed when the ADR value is currently above the average of the previous 14 days and the low or high candle of the day is broken. The trader must make a sell or buy trade in the direction of the breakout.
In addition, a reversal trade can be executed if the price touches the low or high of the day before rallying. Stop-loss and take-profit should be based on price action analysis.
The ADR, or Average Daily Range indicator for MT4 is a very useful tool for understanding current market conditions. The indicator shows the 14-day range of the daily average and the actual ADR value.