What it is
ADR answers a simple question: how far does this market usually travel in one day? If gold has averaged a certain number of points from high to low over the last two weeks, a day that has already covered that distance has used up its usual move.
It is drawn on the price chart, not in a separate pane. The two dashed lines give you a quick expected box for today, centred on the open.
How it is calculated
1. Group the candles into calendar days. 2. For each of the last 14 complete days (today is left out), take the day's high minus its low. 3. Average those 14 ranges. That is the ADR, in points. 4. Take today's open and draw a line half an ADR above it (ADR high) and half an ADR below it (ADR low).
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| days | 14 | 2 to 90 | How many complete days are averaged. Shorter reacts to a recent change in volatility; longer gives a steadier figure. |
How to read it
How to trade it
- 1
Note the ADR in points, for example the average daily high to low on gold or US30, and look at how much of it today has used.
- 2
Entry trigger: in an up trend, buy a pullback after the open only while price is well short of the ADR high line.
- 3
Stop: below the pullback low, and no larger than about a quarter of the ADR.
- 4
Target: the ADR high line, or the remaining distance to a full ADR measured from today's low.
- 5
Avoid fresh entries in the trend direction once price has covered the full ADR; fades back towards the open have more room then.
A target set from ADR is wrong for the day if price breaks through the ADR line and keeps closing beyond it: that is a trend day, so trail the stop rather than taking profit.
WickSpeak draws the ADR high and ADR low lines on the chart from today's open. The key levels panel also lists average daily range levels with how many points away each one is.
Best markets and timeframes
Most useful on intraday charts (5 minute to 1 hour) for gold, US30, NAS100 and the major forex pairs, where day traders plan targets around the usual daily distance.
Common mistakes
- Treating the ADR lines as hard support and resistance; they are averages, not walls.
- Forgetting that news days and Mondays often break the average.
- Using a short ADR during a volatile spell and expecting the same size move next week.
Works well with
Questions traders ask
What is a good ADR period?
14 days is the common default. Use 5 days to reflect a recent change in volatility, or 20 to 30 days for a steadier figure.
How do you use ADR for take profit?
Measure how far price has already moved today and compare it with the ADR. If the day has covered most of it, take profit sooner; if it has covered little, there is likely more room.
Is ADR the same as ATR on the daily chart?
They are close. ATR includes overnight gaps between days; ADR here is purely high minus low within each day.
Why are the ADR lines centred on the open?
Centring on the open gives an even expected box for the day before you know which way it will go. As the day develops, measure from the actual high or low as well.