Volatility & bandsAverage Day Range · ADR
The simple average of daily high-low ranges — a plain read on how much an instrument typically moves in a session.
Works in most conditionsEngine-computed on a fixed sample series
What it is
The Average Day Range is a simple volatility measure that averages how far an instrument travels between its high and its low over a number of recent days. It answers a very practical question for a day trader: how much does this market typically move in a single session, so I know what a realistic move looks like and when price has likely used up its usual range? Unlike the more sophisticated Average True Range, it makes no adjustment for overnight gaps — it looks only at the intraday span from high to low. That simplicity is the point: it gives a clean, intuitive read on typical daily movement in the instrument's own price units. It is used mainly for setting intraday targets and stops and for judging whether a move still has room to run.
How it's calculated
For each day you take the difference between the high and the low — the day's range — and then average that range over the last N days, commonly 14 or 20. There is no gap adjustment and no reference to the prior close; each day contributes only its own high-minus-low span. This is the key distinction from Average True Range, which folds in the previous close to capture overnight jumps, whereas the day range ignores anything that happens between one day's close and the next day's open. The result is expressed in the instrument's price units — dollars, points, or pips — and represents the typical intraday travel. Because it is a plain average, one unusually wide day pulls the figure up until it rolls out of the window.
Reading it, step by step
A larger reading means the instrument typically swings more within a day, offering more room for intraday moves; a shrinking reading signals a calming, coiling market that may be building toward an expansion. Many day traders compare how far price has already traveled today against the average range: if the day's range is already near or beyond it, the session has likely spent its typical fuel and further continuation is less probable. Conversely, if price has moved only a fraction of its average range by midday, there may be room left for the move to extend. It is read as a budget for the day's movement rather than a directional signal, since it says nothing about which way price will go. Watching the reading trend over weeks also flags whether the instrument is entering a more or less volatile phase.
Best timeframes and settings
The Average Day Range is by construction a daily-range tool, so it is computed on daily bars, but it is used to inform trading on intraday timeframes where knowing the day's likely travel matters most. A 14- or 20-day lookback is typical; a shorter lookback reacts faster to a change in volatility regime but is more easily distorted by one wild day, while a longer lookback gives a smoother, more stable read that lags shifts in volatility. The trade-off is between a responsive average that can be skewed by outliers and a stable one that adapts slowly. Day traders scalping or trading intraday breakouts lean on it to size targets, while swing traders use it less. The instrument matters more than fine-tuning the lookback, since it is meant as a rough, intuitive gauge.
When and where to use it
The Average Day Range is most useful for intraday and day-trading decisions on instruments that trade continuously enough for the intraday range to be meaningful — index futures, liquid stocks and forex pairs. Use it to set realistic profit targets and stop distances scaled to how much the market actually moves in a day, and to recognize when a session has likely exhausted its typical range so you avoid chasing a stretched move. It is less relevant for pure position trading, where multi-day moves dwarf a single day's range. Crucially, avoid relying on it where overnight gaps are large and frequent, because it ignores them and will understate real risk; ATR is the better choice there. It is a context tool, not a trigger.
Strategies that use it
A range-target strategy uses the average range to set the day's profit objective: if a stock's average range is $3 and it opens and begins trending, a trader targets roughly that distance from the day's low or high and takes profit as price approaches its typical travel. A range-exhaustion strategy avoids initiating new momentum trades once price has already covered most of its average range for the session, on the logic that the average move is nearly complete and reversal risk is rising. A range-expansion strategy watches for the average range to contract to a multi-week low and then trades the breakout when a session finally exceeds the compressed range, anticipating a shift to a more volatile phase. In each, the reading supplies the yardstick for how much movement to expect and therefore where targets and no-chase zones lie.
Combining it with other indicators
The Average Day Range pairs naturally with the tools that give direction, since it supplies only magnitude — a trend or breakout method decides which way to trade and the range sizes the expectation. The opening range and prior-day levels combine with it to project where the day might reach: opening near the low with a full day's range of room above suggests upside potential to a measured target. Average True Range is a companion worth watching alongside it, since the gap between the two reveals how much of the instrument's volatility comes from overnight moves. VWAP and pivot points give intraday reference levels that range-based targets can be checked against. A momentum oscillator helps confirm that a move toward the target still has force rather than stalling.
Where it fails
The defining weakness is that it ignores gaps, so on instruments that regularly open far from the prior close it understates true risk and can lull a trader into stops that are too tight for the real overnight exposure — ATR should be used when gaps matter. A single unusually volatile day inflates the average and can mislead you into expecting more range than the current, calmer sessions actually offer, until that day rolls out of the window. Because it is only an average, some days move far more or far less, so treating it as a hard limit rather than a typical value leads to premature exits or missed continuation. It is purely a magnitude measure and gives no directional edge. The defenses are to prefer ATR where gaps are significant, to be aware of outlier days skewing the average, and to treat the reading as a rough budget rather than a precise boundary.
A worked example
Suppose a stock has a 20-day Average Day Range of $2.50, meaning it typically travels $2.50 from high to low in a session. It opens at $50.20 near the low of the early range and begins trending up on the day. A day trader long from $50.40 sets a target near $52.70 — roughly the day's low plus the average range — reasoning that a full typical day's travel would carry price to about there. By early afternoon price reaches $52.50, having covered nearly the whole range, so the trader takes profit rather than expecting much more, and indeed price stalls and drifts sideways into the close. Had the trader instead tried to enter fresh at $52.50, the range-exhaustion logic would have warned against it, since the session had already spent its typical fuel. The reading gave no opinion on direction, but it framed how far the day was likely to move and where chasing became unwise.