Understanding the Average Daily Range Indicator
The Average Daily Range (ADR) is a crucial tool for traders looking to gauge market volatility and set realistic profit targets. It helps you understand how much a currency pair typically moves over a day, allowing you to make informed trading decisions.
Why Use the Average Daily Range?
- Risk Management: Knowing the ADR helps you set stop-loss levels that are more aligned with the market's natural movements.
- Trade Entries: Use the ADR to identify potential entry points based on daily volatility.
- Exit Strategies: Setting profit targets using ADR can enhance your chances of hitting your goals.
How to Calculate ADR
Calculating the Average Daily Range is simple:
- Take the high and low of a currency pair for the day.
- Subtract the low from the high.
- Repeat this process for a set number of days (usually 14) and then average those daily ranges.
By incorporating the ADR into your trading strategy, you can better navigate the ups and downs of the market. Happy trading!
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