Stochastics + ADR:
A Potential Edge for Scalpers

How to Spot Whipsaws and Price Spikes in Market Chaos

If you’re one of those traders who rolls their eyes at indicators, I feel you, and I know you’re about a millisecond away from hitting delete… but stick with me for a second.

This might just spark a fresh idea for a discretionary scalping approach or even a testable rule-based system…

(And, as always, this isn’t advice, do your own research. I’m just sharing something I found interesting. Cool? Cool.)

So, here’s the setup: Last week, while watching Trump’s speech at Davos, I noticed the usual market chaos:

  • Order books thinned out.
  • Nasdaq spiked up and down as traders reacted.
  • And once he stopped talking, it was back to normal price behaviour.

Why? Institutions and market makers pull liquidity to avoid getting caught off guard by anything unpredictable.

That leaves the book thinner than usual, so when size hits the bid or offer, it creates exaggerated price spikes.

And as a scalper, those whipsaws could be gold.

Here’s where a blend of two indicators comes in…

STOCHASTICS + ADR

Now, I’m not usually a fan of stochastics… but ADR? I like it.

Here’s the concept:

  • Stochastics helps identify when price is at the upper or lower range of its recent movement.
  • ADR (Average Daily Range) highlights abnormal spikes in price activity compared to the norm. (Especially when you compare two lookbacks.)

Combine the two, and you’ve got a simple way to spot potential opportunities:

Example Strategy:
Use a 10-second chart (yes, tiny timeframe, it’s scalping).

For a long trade:

  • Stochastics shows oversold.
  • ADR(1) > ADR(20) (the current bar’s range is larger than the average of the last 20 bars = price spike).

For a short trade:

  • Stochastics shows overbought.
  • ADR(1) > ADR(20).

Keep it simple with a stop and target of 1 ADR.

Here’s what a chart looked like after modifying our premium Amber indicator to visualise this:


Now, I’m not usually a fan of stochastics… but ADR? I like it.

Here’s the concept:

  • Stochastics helps identify when price is at the upper or lower range of its recent movement.
  • ADR (Average Daily Range) highlights abnormal spikes in price activity compared to the norm. (Especially when you compare two lookbacks.)

Combine the two, and you’ve got a simple way to spot potential opportunities:

Example Strategy:
Use a 10-second chart (yes, tiny timeframe, it’s scalping).

For a long trade:

  • Stochastics shows oversold.
  • ADR(1) > ADR(20) (the current bar’s range is larger than the average of the last 20 bars = price spike).

For a short trade:

  • Stochastics shows overbought.
  • ADR(1) > ADR(20).

Keep it simple with a stop and target of 1 ADR.

Here’s what a chart looked like after modifying our premium Amber indicator to visualise this:

FINAL THOUGHTS

So, the chart’s quite interesting… but let’s be honest it’s a small sample size (1 speech!) and there’s lots of work to do to turn it into a robust risk-managed system.
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But, it could be a decent seed of an idea. (Many one for you scalpers and system designers…)
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If you take this idea further and turn it into something actionable, I’d love to hear how it plays out.
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For now, just sharing my experiments.