It can show you the 5, 10 and 30 day Average Daily Ranges in a compact viewing chart. A trading tool such as the Day Ranger can quickly figure out the Average Daily Range and how many ticks the market has made for the day. Of course you can make your own calculations for determining the Average Daily Range, or use software to quickly calculate the Average Daily Range for you. Why is this important? Well, if we have an idea of how many ticks the market is likely to move in a day we can judge how far the market has already come and how far it is likely to go, relative to the average. Just as the name implies, Average Daily Range is an average range the market makes each day. Notice that the Average Daily Range is not the same as the Average True Range, which is a measure of market volatility. How do you do that? The first thing you need to consider is the market’s Average Daily Range. Just understanding that the markets are in constant flux will better equip you to take advantage of what it is giving (or not giving) and allow you to set effective profit and stop loss targets. The markets are constantly changing, expanding and contracting. The problem originates with the assumption that the markets never change, and of course that is a bad assumption. Why is it so difficult to set effective profit and stop loss targets? Don’t you hate it when you take profit on a trade and the market continues on much further without you? That’s almost as good as getting tagged on your stop loss only to watch the market reverse and head toward your originally intended profit target (and maybe continue past it!) What’s going on?
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