1. What is Average Daily Range (ADR)?

Average Daily Range (ADR) is a technical analysis indicator that measures the average trading range of a security over a specified period. It helps traders understand the typical price movement expected during a trading day.

2. How Does the Calculator Work?

The calculator uses the ADR formula:

Where:

• \( Total\ Range \) — Cumulative range over the period (unitless)
• \( Days \) — Number of trading days in the period

Explanation: The formula calculates the average daily trading range by dividing the total range by the number of days in the observation period.

3. Importance of ADR Calculation

Details: ADR is crucial for traders to set appropriate stop-loss and take-profit levels, manage position sizing, and understand market volatility. It helps in risk management and trade planning.

4. Using the Calculator

Tips: Enter the total range value and the number of days. Both values must be positive numbers (total range > 0, days between 1-365).

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good ADR value?
A: There's no universal "good" ADR value as it depends on the security and trading strategy. Higher ADR indicates more volatility, which may be desirable for some traders and risky for others.

Q2: How is total range calculated?
A: Total range is typically calculated as the sum of daily ranges (high - low) over the specified period.

Q3: What time period is best for ADR calculation?
A: Common periods are 14, 20, or 30 days, but the optimal period depends on your trading timeframe and strategy.

Q4: Can ADR be used for all markets?
A: Yes, ADR can be applied to stocks, forex, commodities, and any other traded instruments where daily range data is available.

Q5: How does ADR help in trading?
A: ADR helps traders set realistic profit targets, determine appropriate stop-loss levels, and assess whether a security is trading within its normal range or experiencing unusual volatility.