Daily Range Day Trading Strategy

Daily Range Day Trading Strategy


By tracking the average true range, a trader cannot identify the prevailing trend on the market. The ATR only tracks the magnitude of range, so it has limited use for generating accurate trading signals. It’s a useful indicator only for giving an idea about how much the price may move in a defined time frame. Day traders are attuned to events that cause short-term market moves. Scheduled announcements such as the release of economic statistics, corporate earnings, or interest rate announcements are subject to market expectations andmarket psychology. That is, markets react when those expectations are not met or are exceeded—usually with sudden, significant moves which can greatly benefit day traders.

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And don’t underestimate the role that luck and good timing play. A stroke of bad luck can sink even the most experienced day trader. But there are day traders who make a successful living despite—or perhaps because of—the risks. You can apply range trading strategies to most investments, including stocks, bonds, closed-end funds, ETFs, and more. A rule of thumb is to multiply the ATR by two to determine a reasonable stop-loss point.

How To Read Average True Range Indicator

Traders who can pay close attention to market developments will be able to “snipe” profitable positions and take advantage of various triangular price patterns. High frequency day traders have access to much lower trading fees compared to average traders. The position trader is likely to “ride the trend” up and down during a stock’s cycle as long as the trend is intact. Swing trading would be trading the up or down movements within the stock’s cycle. The ATR is designed to help smooth out daily fluctuations, so a long lookback might cause the swing trader to miss out on some, well, swings.


If you are day trading stocks​ or forex, in particular, these markets can be impacted in the short-term by major news or economic events. Technology has played a big part in this – thanks to fast broadband and mobile connections we have a wealth of real-time market information at our fingertips. Because this is a short-term setup, it is important that the trade starts working right away. Failure to continue in the direction of the signal is the first warning.

Use of stop losses in trading ranges

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Notice that NR7 days formed back-to-back on three different occasions. While not always the case, these back-to-back NR7 days did not result in different signals, they simply affirm the existing signal from the prior NR7 breakout. With nine signals in total, traders could have to watch price action closely, exercise judgment and manage stops. Momentum is a measure of the strength or acceleration of a security’s price trend. For example, a positive news release may trigger a sharp price increase that is sustained for a period of time. A day trader who is expecting such a move might buy the security, looking to sell it for a profit after the strong move up in price.

Day trading tips

On the Forex market, this extra volatility might not be very useful because huge gaps are not so common. That why many traders prefer to use the Average Daily Range. The main difference between the two indicators is the fact that the Average True Range also includes gaps. Well, by using the Average True Range we can incorporate the volatility determined by a gap.

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This is true for https://forexaggregator.com/s, commodities, futures (etc.) and of course, Forex. This is a lesson about the conceptof average range, rather than a specific indicator. We’ll discuss the concept of ADR as well as how we can use it to our advantage when trading the Forex market. This scan reveals stocks that have just had an NR7 day during a downtrend and whose CCI values indicate an overbought condition. This scan reveals stocks that have just had an NR7 day during an uptrend and whose CCI values indicate an oversold condition. Two of the best instruments to measure volume during breakouts are the volume indicator and the VWMA.

These include using https://trading-market.org/ management tools and being able to stay level-headed in spite of the fast-paced and high-risk market environment. Increases in observed momentum offer buying opportunities for day traders, while decreases signal timely exits. Decreases that trigger bearish moving average rollovers in multiple time frames offer short saleopportunities, with profitable sales covered when moving averages start to turn higher. The process also identifies sideways markets, telling the day trader to stand aside when intraday trending is weak and opportunities are limited.


So if you’re buying a stock, you might place a stop-loss at a level twice the ATR below the entry price. If you’re shorting a stock, you would place a stop-loss at a level twice the ATR above the entry price. The average daily range is a simple but powerful statistical fact that all successful Forex traders pay attention to.

The ADR indicator we use here allows us to automatically plot the upper and the lower level of the ADR. In the image below you will see a chart with the daily ADR indicator. The 15-period ADR value is 1028, which corresponds to 102.8 pips.

  • If you have been trading for some time, you know that currency pairs tend to reach the extent of their daily range at some point in the New York session.
  • Please ensure you fully understand the risks involved by reading our full risk warning.
  • A trader will inspect chart patterns to identify typical highs and lows during the day while keeping a close eye on the difference between these points.
  • But that means traders have to be willing to realize a loss, which is hard for many traders to accept, even though it’s essential to long-term survival.
  • If you only remember one thing from this article, the middle of the day is for hedge funds and large institutions to build sizeable positions, not for you to day trade breakouts.
  • Average Day Range only looks at how much the price moves between the high and low on a given day.

This time frame is usually between 10am and 12pm, with some exceptions. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 75% of retail client accounts lose money when trading CFDs, with this investment provider.


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