Average Daily Range - Page 2

Ms_Mel · #11 (**permalink**) 06-28-2009, 08:24 PM

Well simply put, the “high to low” is very simply the difference of the high and the low of the day. Here is a pic of eurusd, 1H. You can see from the vertical lines (white) when the day started and ended. You see here a high of 1.4118 and a low of 1.3983.

4118 – 3983 = 135

Now if you take the ATR indicator on a daily chart and set it to 1 (one day) as I did in the previous post, it will give you the exact same value of 135.

So the “high to low” and the ATR (daily, set to 1) both give us the value of the range from high to low for the last day.

The Average Daily Range, for its part, is a bit more complicated. Here is the code:

R1 = (iHigh(NULL,PERIOD_D1,1)-iLow(NULL,PERIOD_D1,1))/Point;
for(i=1;i<=5;i++)
R5 = R5 + (iHigh(NULL,PERIOD_D1,i)-iLow(NULL,PERIOD_D1,i))/Point;
for(i=1;i<=10;i++)
R10 = R10 + (iHigh(NULL,PERIOD_D1,i)-iLow(NULL,PERIOD_D1,i))/Point;
for(i=1;i<=20;i++)
R20 = R20 + (iHigh(NULL,PERIOD_D1,i)-iLow(NULL,PERIOD_D1,i))/Point;

R5 = R5/5;
R10 = R10/10;
R20 = R20/20;
RAvg = (R1+R5+R10+R20)/4;

The indic « fine tunes » the data, using a geometric mean or an exponential average as opposed to a straight average.

You can calculate this in Excel:

The ATR for Friday is 135, for the last 20 days it comes out to 173. The ADR for the same period comes out to 156.

Hope this helps and I haven't confused you more! Google both terms and you should get some more detailed explanations.

Happy trading,

trading801 · #12 (**permalink**) 07-02-2009, 09:25 AM

ok.. which is usually a better indication?

Ms_Mel · #13 (**permalink**) 07-03-2009, 10:30 PM

Quote:

Originally Posted by trading801

ok.. which is usually a better indication?

Well it all depends on what you’re looking for or for what reason you need this data.

I personally use it to sometimes calculate TPs (I use ½ of the ADR) or SLs (full ADR).

I don’t use it “in” my trading strategies, except to see if today’s range is much higher or lower than usual, but you can see this by simply looking at your charts.

You can also use it to compare pairs to see which has super ranging capacities and which has the lowest. I made a table which includes various data (below) and you can see I’ve put 2 columns for the ADRs. The values for the first were taken last year in July and the second column shows the values 1 year later. So you can compare if pairs have become more volatile (it’s the case for most pairs since last year) or are the same or less.

But to answer you question as to “which is better” it all boils down to either you want (ATR) a straight average which simply averages out the highs and lows or (ADR) an exponential one which puts more emphasis on the recent past than on the far away past, this way maybe better demonstrating what is going on right now (or at least in the recent past).

Happy trading,