At the start of each trading session, you will receive an email with the author's new posts. The average daily range is one of those concepts that truly captivates traders. People imagine the amazing possibilities that they will be able to create using this tool in their trading.

Many traders believe that if the price rallies to its daily range, they should sell it, and vice versa. So I am going to explain why using the average daily range purely for profit targets is the best idea.

Because trying to cram it into every possible trading scenario can be bad news. Firstly, the average daily range only provides a guide on the kind of volatility that can be expected from a currency pair during the session.

It does not tell you how many pips up or down it will actually move. In fact, the average daily range has absolutely no bearing on how many pips the price may move during a session.

Such moves are driven entirely by fundamental factors. This is why you should not buy or sell at the extremities of the daily range without expecting an inconsistent performance. Anything can happen to drive the price - any distance and in any direction - at any time.

So does this mean that the average daily range is useless? It just means that if you base any trading on ADR you have to consider it a bit more carefully…. If it continues, you can hold.

And what if it shows signs of exhaustion? You can be sure that the volume for that particular currency has dried up at around the usual levels. This strategy will also allow you to calculate your entries into the market with much more clarity.

This will also save you from losing trades and pips. The best way to become comfortable with this concept is to apply it to your charts and practice. This is true for most trading concepts. Watch the reactions that occur at these areas when you use them as profit targets. Use the average daily range purely for profit targets. Do not try to cram it into every possible trading scenario.

After a few weeks you will start to see the power and effectiveness of the daily range, but only when used correctly!

How to Trade Forex "Blind" Using Average Daily Range

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