Average Daily Range MT4 Indicator
The average daily range (ADR) mt4 indicator refers to a metatrader tool that is used to measure the average daily range of a specific number of previous days. The average range helps retail traders to forecast the take profit and stop-loss levels.
ADR mt4 indicator plots two lines indicating the high and low daily range. It will also help to avoid trading when the price is overbought or oversold.
The formula used in the ADR indicator
The average daily range means the difference between high and low of daily candlestick in the number of pips. You have to put a custom value in the indicator that will guide the program to calculate the average by considering that specific custom value.
Average daily range = High – Low
ADR formula to calculate an average daily range of the last five days is:
ADR indicator formula = Sum of daily range of previous five days / total number of days
Working of mt4 ADR indicator
By default, the ADR indicator calculates the average daily range of the previous five days. It will use the data of the last five daily candlesticks to calculate the current ADR. But you can change the value to 10 or 15 or any other value according to your strategy.
After calculating the average, ADR plots two lines above and below the current price. These lines indicate that price will remain within those lines. If price breaks the upper or lower line then it! means market volatility is great than usual. So to stay away from the market during a very high Volatility period.
As the two lines are drawn by calculating the average so they help in adjusting the stop loss or take profit levels. For example, according to the intraday chart pattern, the stop loss is above the lower ADR line. Now you can adjust stop loss to below the ADR line to keep your stop-loss safe.
Importance of ADR indicator
The high and low levels of ADR indicator also acts as key levels. because the high represents the overbought conditions during high volatility and the low level indicates oversold conditions. Price usually reverses from these levels.
Conclusion
Prediction is always made by using the average value from the historical data. It also helps to make profitable strategies. ADR mt4 indicator has made it easy by showing the values on the candlestick chart. So a retail trader can adjust the different trade levels and analyze the market conditions.
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