ADR% - Average Daily Range % by MikeC (AKA TheScrutiniser)

The ADR% - Average Daily Range % indicator calculates the average daily price volatility as a percentage over a specified period to help traders identify current market volatility levels and potential price exhaustion points.

Usage

The Usage section focuses on identifying high and low volatility environments relative to historical norms. Traders can use the ADR% to determine if the current daily price movement is extended or if there is still room for further intraday expansion.

• Volatility Benchmarking: By observing the ADR% value, a trader can gauge if a 1% move in a specific asset is typical or an anomaly.
• Trade Planning: If an asset has already moved its full ADR% for the day, it may signal a potential reversal or a slowdown in momentum, suggesting that new breakout trades may have lower probability.
• Filtering Assets: The indicator can be used to compare different symbols to find assets with higher relative volatility for day trading strategies.

Details

The script calculates the Average Daily Range percentage by retrieving daily high and low data via a security request, ensuring the calculation remains consistent regardless of the chart's timeframe. The formula used is: 100 * (SMA(Daily High / Daily Low, Length) - 1)

This specific implementation utilizes a corrected formula (refined by MikeC and GlinckEastwoot) to provide a more accurate representation of percentage-based volatility compared to standard range calculations that do not account for the relationship between high and low prices as a ratio. By using a Simple Moving Average (SMA) of this ratio, the indicator smooths out daily noise to provide a reliable trend of volatility over the lookback period.

Settings

• Length: Determines the number of days used to calculate the moving average of the daily range. The default value is 20, representing approximately one trading month.

FAQ

What does the ADR% indicator measure? It measures the average percentage difference between the daily high and daily low over a specific lookback period, providing a metric for an asset's typical daily volatility.

Can I use this on intraday timeframes? Yes, the indicator uses daily data requests, so it will display the daily range percentage regardless of whether you are viewing a 5-minute, 15-minute, or 1-hour chart.

How do I access the ADR% - Average Daily Range % tool? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.