Disliked{quote} {quote} {quote} - eyeballing a price chart with multiple days, noticing some days are tiny, others are large with no discernable pattern - loading an atr(1) on a daily tf to quantify this and seeing how jagged the line is Daily range is volatile, and by volatile I mean each day's range is erratic and the range of the ranges is also large. Judging from your pic, what you're thinking of is averages, and the averages (10-100period ma) are fairly stable. What I'm pointing out is that, because the spread of ranges is high, in the order of 2-5x...Ignored
Knowing how to use the ADR for our advantage is beyond me to explain; here are some statistical facts from actual research:
Around 60% of the time price trades within its normal average daily range (ADR) and pushes above these levels are usually an indicator of a sharp price move which will typically have a pullback (profit take) move following it. You can take advantage of these sharp moves by trading the pull back from the top or bottom of the daily range to the most recent level of support or resistance.
Over 20 years of historical data was gathered to find the average percentage chances of price moving beyond specific ADR levels for the major forex pairs and a selection of crosses. This data indicated that price only moved beyond 200% of its ADR 3% of the time meaning your odds of a reversal or pullback at that level would be 97%!!!
These are the ADR extension averages shown by the data:
Price exceeded 100% of ADR10 roughly 42% of the time.
Price exceeded 125% of ADR10 roughly 23% of the time.
Price exceeded 150% of ADR10 roughly 12% of the time.
Price exceeded 175% of ADR10 roughly 6% of the time.
Price exceeded 200% of ADR10 roughly 3% of the time.
Price exceeded 225% of ADR10 roughly 2% of the time.
As you can see from the levels above if price gets to 150% of its normal ADR the odds of it going further are only 12% giving you a massive advantage. Wait for price action to show you signs of a turn at that level and jump in on the pullback!
It takes a lot for me to IGNORE you, but you can try.
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