If you’re the type who focuses on capturing chunks of information such as price action and stock movement in the foreign exchange market on a daily basis, you may be categorized as an average day trader. As your strategy goes, you keep tabs on market conditions regularly; being active by monitoring charts frequently is a profitable means. But, are you really set out to be trading with such an approach?
What Is Average Day Range Trading?
Average day range trading is a forex strategy that dwells on the concept of volatility on a given day; it only gives importance to volatility, rather than on the calculations for pip movement. It is a technique that serves as reminder that results can be valued temporarily, and that trading activity may drastically change on the following day. Alongside, it follows that a trader holds no control over market activity (i.e. current economic conditions, trends and other fundamental factors are solely responsible for influencing price); his job is merely to observe price action on a chart thoroughly.
Average Day Range vs. True Range Average
It isn’t rare for novice traders in the forex market to mistake the average day range and true range average as terminologies with similar meanings; they may be about identifying the average movement of trades, but their difference is emphasized on their set periods. One highlights the daily average, while the other highlights multiple daily averages. In other words, average day range determines the average for day 1, whereas true range average determines the averages for days 1, 2, 3, and so forth.
Moreover, the results for calculations of the average day range are used for calculations of the true range average. With the former, previous market prices and other relevant but outdated factors (e.g. previous highs and lows, previous market trends, etc.) are valued. Simply put, arriving at the figures for the average day range is the preceding step to determining the true range average.
A Drawback Doesn’t Have to Stand in the Way
While average day range trading can be profitable, an issue with inconsistencies regarding results can arise; rapid and unpredictable price action may come into play. However, the trick is to be dedicated into trading and be exceptional where technical analysis is concerned. Granted that you concentrate on reading charts, you can spot even minor signals of an incoming trend reversal or a different-paced price action.
Article by mtrading.eg
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