Average Daily RangeADR
The average daily range is the average distance between each day’s high and low over a period, such as 14 or 20 days. Unlike the average true range, it ignores gaps between one day’s close and the next day’s open.
The average daily range tells you how far a market typically travels from low to high in a day. Traders use it to size stops and targets and to judge whether a day’s move is stretched.
- Category
- Indicators and Tools
- Reading time
- 3 min
- Also called
- Average range, Average high-low range
- Updated
Average daily range in plain words
Each day’s range is the high minus the low; StockCharts calls this High Minus Low and says it is used primarily as a volatility gauge.1
Average those ranges over 14 or 20 days and you have the average daily range.
Unlike the average true range, ADR ignores gaps between sessions, so it misses volatility from overnight jumps or limit moves.2
How to calculate ADR
Pick the period
Choose 14 or 20 days; ATR is typically based on 14 periods too.2
Find each range
For each session, take the high minus the low.1
Add the ranges
Sum the daily ranges over the period.
Divide
Divide by the number of days to get the average.
Compare with ATR
ATR also counts the current high less the previous close, which ADR ignores.2
Read in context
Judge any day's range against that market's usual range, not in isolation.1
Worked examples
Example 1 — Simple ADR
ADR 80A hypothetical pair has five daily ranges of 80, 90, 70, 100 and 60 pips.
| Total | 400 pips |
| ADR (5 days) | 80 pips |
Each value is high minus low for a session, and the average is 80 pips.1
Example 2 — Stretched day
StretchedA hypothetical stock has an ADR of $2 and has already moved $2.40 today.
| Today’s range | $2.40 |
| ADR | $2.00 |
Judged against its average range of volatility, the day is stretched, so chasing it is riskier.1
Example 3 — Gap day
Gap missedA hypothetical stock gaps up $3 at the open, then trades a $1 range.
| High − low | $1 |
| True range | $3+ |
A high-low measure would fail to capture volatility from the gap, so ADR understates risk here.2
ADR vs ATR
| Aspect | Average daily range | Average true range |
|---|---|---|
| Formula | High − low | Greatest of three ranges |
| Gaps | Ignored | Included |
| Best for | Intraday range targets | Overall volatility |
| Direction | None | None |
Where ADR is used
Stop placement
Size a Stop Loss relative to normal movement.
Profit targets
Set a realistic Take Profit.
Day trading
Judge room left in a Day Trading session.
Position sizing
Scale Position Sizing to volatility.
Advantages and disadvantages
Advantages
- Very simple to calculate.
- Intuitive for intraday traders.
- Good for range-based targets.
Disadvantages
- Ignores gaps.
- Shows no direction.
- Sensitive to the period chosen.
- Lags sudden volatility shifts.
Going deeper
Read as far as you need. Each level builds on the one before it.
Common mistakes
Using ADR for gappy markets
Use ATR instead.
Treating ADR as a ceiling
Ranges can exceed the average.
Reading direction
ADR has none.
Mixing sessions
Be consistent about the session used.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- ADR averages daily high-minus-low.
- Common periods are 14 or 20 days.
- It ignores gaps.
- ATR includes gaps.
- Use it for stops and targets.
Frequently asked questions
Is ADR the same as ATR?
What period should I use?
Does ADR predict direction?
Further learning
- Average True Range
The gap-aware cousin.
- Volatility
What ADR measures.
- Price Gap
What ADR misses.
- Stop Loss
Using ADR for stops.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- StockCharts ChartSchool. High Minus Low (opens in a new tab) Checked .
- StockCharts ChartSchool. Average True Range (ATR) and Average True Range Percent (ATRP) (opens in a new tab) Checked .
- Fidelity. Average True Range (ATR) (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.