Maximise Your Profits with the ADR Hack

Using Average Daily Range to Predict Price Targets

So, one way to predict where price may go today is to use ADR (average daily range).

The thesis is that if you know the daily range for say Gold is $24 on average, and you’re long on an uptrend, you mark the ADR on your chart from the low print and get an expected price target.

Like this:
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​Average Daily Range (over the last 10 days) the red line at the bottom of my chart, is running at $26.

Now, let’s say you went long on a classical break of prior highs.
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In this case $2,240. (Scroll down for chart)
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Taking that ADR of $26 you’d draw a $26 price range from the current intraday low up to the end of the $26 move. In this case $2,353.
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Your assumption is:

  1. The low is in for the day
  2. Price will move at least the average range for the day

These are just assumptions BTW, not a given… we’ve seen super low-range days and big ol’ reversals. But I don’t think they are unreasonable…
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That $2,353 is your first target, at least $17. (And it looks like your stop could reasonably be under that low at $2,330 so the RvR stacks up.)
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​Here’s what it looks like.

It finally hits that target later on at 13:35.

The downside of this method is that the ADR is just an average, often you’ll get one or two big range days skewing the whole thing.
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Like this: Histogram is a one-day range, and the red line is the 10-day average.

So, you can just eyeball it and ask yourself these questions:

  • What’s the realistic minimum range we’ll do today unless it’s a real outlier?
  • And what’s most likely? (I guess a ‘mode’ calculation might be effective here)

You get the idea…

Using recent range data to give you some idea of where price may move too can really help structure your trades.

Or at the very least give you a good reason to hold the damn thing!