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Average daily range

The mean distance between high and low over recent sessions, used to judge how much room a market typically gives in a day.

If an instrument averages a 2 percent daily range, a scalper targeting 1.5 percent is asking for most of a typical day's movement in one trade. Knowing the number keeps targets realistic.

Intraday traders also use it as a rough exhaustion guide: once a session has already travelled well beyond its average range, further continuation in the same direction has historically been less common, though this varies hugely by instrument and by whether news is driving the move.

Unlike true-range it ignores gaps, so on instruments that gap often it understates real movement. And like all averages it describes the typical day, which is precisely the day on which nothing interesting happens.

Related: true-range, atr, volatility-expansion, opening-range, take-profit

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

Educational only, not advice. Spotted an error? Post in Site Feedback.