Field Guide to Trading Terms

Average daily range

Family VI · Charts & indicators

Not to be confused with exponential moving average, moving average, moving average crossover.

Average daily range (ADR) is a volatility measure calculated by averaging the daily high–low ranges over a chosen lookback period, such as 14 or 20 days. It quantifies how much an instrument typically moves within a single session, independent of direction. Traders use it to set expectations for intraday price movement and to size positions relative to normal volatility.

Calculation

The average daily range is computed by summing the daily ranges (high minus low) over N periods and dividing by N. The result can be expressed in price terms or as a percentage of the closing price. A common formula is:

ADR = (Σ (Highi − Lowi)) / N

where i runs from 1 to N. Some variations use the true range, which accounts for gaps, but the simple high–low range is the standard definition.

Worked example

5-day average daily range for a stock
Day 1High 152.30 − Low 149.802.50
Day 2High 153.10 − Low 150.202.90
Day 3High 151.90 − Low 148.503.40
Day 4High 154.00 − Low 151.003.00
Day 5High 155.20 − Low 152.103.10
ADR(2.50 + 2.90 + 3.40 + 3.00 + 3.10) / 52.98

Interpretation and use

A higher ADR indicates greater intraday volatility, while a lower ADR suggests quieter trading. Traders may compare the current day's range to the ADR to judge whether the session is unusually active or subdued. For example, if the ADR is 2.98 and the current range is 1.50, the day is relatively calm. ADR is often used alongside other volatility measures such as average true range.

Often confused with

exponential moving average
An exponential moving average is a smoothed line that weights recent prices more heavily, whereas average daily range measures the average high–low span; the visible sign is that EMA is a single line on the chart, while ADR is a numeric value or a separate indicator line.
moving average
A moving average is the mean closing price over a period, used to identify trend direction, while average daily range averages the high–low difference to gauge volatility; the visible sign is that a moving average appears as a line on the price chart, whereas ADR is typically shown as a value or in a separate pane.
moving average crossover
A moving average crossover occurs when two moving averages intersect, generating a trend signal, whereas average daily range is a standalone volatility statistic; the visible sign is that a crossover is marked by two lines crossing, while ADR is a single number or a single line.

See also

Family: VI · Charts & indicators · Index A–Z