To calculate the average, the indicator first counts the difference between the maximum and minimum prices for a given number of days, and then calculates the average on the calculated data:
Average Day Range (Average Day Range) and ATR (Average True Range) technical indicators are used to analyse volatility in the markets, but are calculated and interpreted differently.
Average Day Range (ADR) measures the average amplitude of price fluctuations over a specific period. To calculate the ADR, you usually take the difference between the maximum and minimum price of each day for a selected period (for example, 14 days) and then calculate the average of these differences. ADR helps traders understand what volatility can be expected from an instrument during a trading day and use this information to plan trading strategies.
The Average True Range (ATR) also serves as a measure of volatility, but is calculated in a slightly different way, which makes it a more versatile and accurate indicator. To calculate the ATR, you first determine the true range for each day, which is the maximum of the following three values:
Then, using these true range values, calculate the average value for a certain period (often 14 days). ATR takes into account the gaps between days, making it a more accurate indicator of volatility, especially in markets with large price gaps between trading sessions.
