Summary Cheat Sheet: Using ADR to Find Short Term Trading Opportunities

• Average Daily Range (ADR) shows the average pip range of a Forex pair measured over a certain
number of periods.

• ADR measures the currency pair’s daily volatility and can be used to find hidden support and
resistance areas on the chart.

• The ADR calculator formula is as follows:

ADR = (n1 + n2 + n3 + n4 + n5) / # of periods

( where n is the high low range in pips for the specified day )

• When ADR is above average, it means that the daily volatility is higher than usual, which implies
that the currency pair may be extending beyond its norm.

• The ADR can be helpful in setting targets for positions you are currently in.

• The ADR can be used for trading intraday reversals and breakouts.

• To build the current ADR range, you need the current daily low and daily high. To find the upper
and the lower level of the ADR range on the chart, you would need to apply the ADR value as
follows:

o To build the upper ADR level, you would need to apply the ADR value upwards starting from
the daily bottom.
o To build the lower ADR level, you would need to apply the ADR value downwards, starting
from the daily top.

• ADR Trading Strategy:

o Enter a trade when the price action breaks the ADR range and enter in the direction of the
breakout. Also, enter a trade when the price action bounces from one of the ADR levels. In
this case, you enter in the direction of the bounce.
o If you trade a breakout, put a stop beyond the broken level. If you trade a bounce, put a
stop beyond the created swing level, from which the price action bounces from.
o If you are trading a breakout, stay in the trade at least until the end of the trading session,
or until price action provides contrary signals. If you are trading a bounce, try to stay in the
trade until the price action reaches the opposite ADR level, or until the end of the trading
day.