Description:
The Average Daily Range Lower (ADRL) Indicator is designed to work on intraday timeframes and is not supported on the Daily, Weekly and Monthly timeframes. On intraday charts, it will plot a lower indicator at the bottom of your chart that contains 3 separate data points.
The first data point is a Rolling Daily Range. This is defined and controlled by the only input parameter for this indicator, the length. The default setting is 3. This indicates the 3-day range when set to the default. The second data point are the vertical bars. If the bar is light in color, it did not exceed the Rolling Daily Range. If the bar dark in color, it did exceed the Rolling Daily Range and is outside of the average. The height also indicates the same information. Finally, we have the third data point – the dot on the vertical bar. This dot indicates the degree to which the corresponding candle contributed to changing the daily range. You will notice on inside bars, or bars with a similar or smaller range than other bars around it, that the dot is at the bottom of the bar. This indicates that it did not contribute materially to the range. However if the dot is at the top, then it indicates it contributed materially to the range.
Input Parameters:
- Length: Number of periods used in the calculation.
Use Cases:
- Identify Potential Support Levels: The ADRL can suggest where the price might find support during a trading session. Prices nearing the ADRL may indicate buying opportunities if the price is expected to bounce off these levels.
- Risk Management: Traders might place stop-loss orders slightly below the ADRL to mitigate risk, anticipating that the price is less likely to fall below this threshold within the trading day.
- Trend Reversal Signals: While primarily a tool for identifying potential price floors, significant deviations from the ADRL might also hint at trend reversals, especially if accompanied by other indicators
Do you want to learn more? Check out our Blog Article.
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