I’m trying to understand the concept of Average Daily Range.
Attached is an image.
According to the image I understand that price travels 152 pips in a week and 140 in a month.
Now the 5 days ADR has 122 pips and yesterday was 194 pips.
Now my question is if the weekly range is 152 and yesterday the price went to 194 pips does this mean the price will be in for a retracement or will it keep going?
I’m just having a hard time grasping the idea behind price movement and exhaustion. If anyone can help me on this, it would be greatly appreciated.
Last weeks price range doesn’t tell you anything about what will happen tomorrow.
“Will it retrace or will it continue”, if anyone here could answer that question with certainty, they would likely be relaxing on a private island right now.
The GBP had a strong day yesterday. Probably to do with the UK Prime Minister’s cordial talks with Germany and then France about Brexit terms: maybe the big players reckon there is a slightly lower probability based on that of a no-deal Brexit.
But one wide range day or even one strongly positive day proves nothing in isolation. This is like a scientific theory - it only can be relied on when it is tested and either holds or fails. The GBP downtrends all remain downtrends. If price rises a fraction higher than it did yesterday or falls a fraction lower, this means nothing significant. If price continues to rise it could end the downtrend but we’re nowhere near that yet and there is no indicator, not even price, which will tell you what price will eventually do days from now. If price falls through the low of yesterday and continues to fall, that pretty much confirms the downtrend is still in place. Don’t buy in a downtrend.
Looking at the bigger picture, yes it is in downtrend.
However, I was looking to gain some insight/knowledge on how the average daily range can help identify when the move upward or downward would “likely” finish based on the weekly pip range.
It’s my understanding if weekly range is 150 pips then in each trading day there “can” be 30 pip (whether up or down) movement or it can be any variation which amounts to the total.
I would like to know what happens if it exceeds the 150 pip range. Would there be a likely scenario of retracement of the original move. Whatever that maybe.
You are being drawn into false logic here. No daily range in the week can be greater than the weekly range but otherwise there is no direct relation between the two.
