Best ADR Indicator
MT5Also Available for MT4ADR indicator great tool for enhancing your trade exit strategy. Shows the price range within a specified period and projected top and bottom points of the price.
Description
There is a lot of psychology in trading. For example, you must understand resistance and support zones. Understanding these levels helps set realistic take profit levels that price can reach within a certain period. Additionally, it helps you know when the price might turn around. This is where the ADR indicator for MT5 free download comes in handy.
How it works
The Average Daily Range (ADR) indicator is designed to help you set realistic profit targets. It measures the difference between the current price and the extremes (upper and lower). Additionally, it measures the average movement of pips over a specific period, usually 20, 10 and 5 days. With this information, the trader can determine whether the profit target is realistic or not.
The indicator’s operation is based on the average true range of the day frame. Essentially, the 20-day average daily range is the 20-day ATR on the daily time frame. The same case applies to 5-day and 10-day ADRs. In other words, today’s average daily range represents the current day’s price range. This range is measured in points.
Essentially, the indicator projects the top and bottom of the chart based on the 5-day ADR. The indicator predicts the top of the range by adding the 5-day ATR to the low of the current day’s price range. Likewise, he forecasts the bottom using the high of the daily price range minus the 5-day ATR. The indicator then measures the distance in points between the current price and the predicted highs and lows. Moreover, the indicator measures the direction of price movements and calls them positive if the price movement is positive, and negative if the price movement is in a negative direction. This information appears in the upper left side of the price chart.
How to trade using the average daily range indicator
The average daily range indicator helps traders determine whether their take profit is realistic. It also helps to decide whether there is enough room in the direction of the deal. However, it does not provide reversal, trend or momentum signals. Therefore, you should use it in combination with other strategies.
Long position
Open a buy position when your profit point is within the predicted top of the ATR indicator. For an exit strategy, set your take profit below your forecast top. The ideal stop loss would be below the entry point – a few pips below the recent swing low would be a good stop loss.
Short position
In a good short trade, the take profit is above the forecast bottom and the stop loss is above the recent swing high.
Chart Example
The images above show the price movement of the Euro against the US Dollar over one hour. According to the indicator, the average range for 20 days is 51 points. Similarly, the 10-day ADR is 53 pips and the 5-day ADR is 59 pips. According to the indicator, the current daily price range is 6 points. Likewise, the indicators show that price is 56 pips away from hitting the projected top and 56 pips away from the bottom based on the 5-day ATR.
Conclusion
ADR is a great tool for planning trades and entry points. It helps you set realistic take profit targets and decide if a trade is worth the risk. Since the indicator does not offer buy or sell signals, it should be used in conjunction with other indicators.
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