AVERAGE DAILY RANGE AND ANTSSYS
The Average Daily Range shows the best hunting ground for current trading opportunities. This is where ANTSSYS traders gather because the trade pickings are good. Start with the top 5 pairs on this list – or those near or above 100 pips on 5 day ADR – and inspect them for compatibility with the ANTSSYS trading methods.
HOW TO USE THE AVERAGE DAILY RANGE WHEN TRADING
The average daily range is one of those concepts that captivates people who imagine all of the amazing possibilities that could be created using this tool in their trading. For example, if the price rallies to its daily range and maybe even beyond, then sell it, and vice versa. If it drops below its expected range then buy it.
Sadly, it’s not quite that simple and I am going to explain why using it purely for profit targets, is a better idea than trying to cram it into every possible trading scenario.
So why doesn’t it work for entering the market?
Well firstly, the average daily range only gives a guide on the kind of volatility that can be expected from a currency pair during the session and not how many pips (up or down) it will actually move.
The key point to bear in mind is that the average daily range has absolutely no bearing on how many pips the price will move or not during a session; these moves are driven entirely by fundamental factors.
This means that if the average daily range is 30 pips but the central bank of the country announces they will be cutting interest rates by 3% next week, you can be rest assured that the market will fall a lot more than its 30 range.
This is why you cannot reliably just buy or sell at the extremities of the daily range and expect any kind of consistent performance because anything can happen to drive the price any distance and direction at any time.
So does this mean that the ADR is useless? Far from it. It just means that any trading based on it needs to be considered a bit more carefully…
The best way to incorporate this information is to use the range as a guide for profit targets.