Direct answer: the standard ADR calculation
Average Daily Range (ADR) in forex is calculated by taking a daily price range for each day in a lookback window and then averaging those daily ranges.
A common definition is:
- Daily range = Daily High − Daily Low (measured in price units or pips)
- ADR = (Sum of daily ranges over N days) ÷ N
This produces one number that represents the average size of typical daily movement during the selected period.
Explanation: inputs, definitions, and how it “works”
1) Pick your “day” boundary
ADR requires one value for each day. Decide what “daily” means in practice (for example, based on your chart’s daily candle time zone or a specific market session rule). If your day boundaries shift, ADR can change even with the same underlying price series.
2) Define the daily range measure
Most commonly, daily range uses the high and low of the day:
- Range(d) = High(d) − Low(d)
You can compute in:
- Price units (e.g., 1.0850 − 1.0800), or
- Pips, if you convert using your instrument’s pip definition.
Keep it consistent across all days in the averaging window.
3) Choose a lookback length N
ADR is always tied to a window (for example, 10 days, 20 days, or 30 days). A longer window smooths out short-term fluctuations; a shorter window reacts faster.
4) Compute the average
For days d = 1..N:
- ADR = (Range(1) + Range(2) + … + Range(N)) ÷ N
Some analysts also compute variations (like median daily range), but the question is specifically about average, so the arithmetic mean is the core method.
Example and checks you can do independently
Example with simple numbers
Assume you have N = 5 days with daily ranges (already measured in pips):
- 18, 22, 25, 20, 15
Then:
- ADR = (18 + 22 + 25 + 20 + 15) ÷ 5 = 100 ÷ 5 = 20 pips
Checks to verify your calculation
- Unit check: If you computed High − Low in price units, your ADR will be in price units; if you converted to pips per day first, ADR should be in pips.
- Data consistency: Ensure you used complete daily candles for each day in the window. Missing or partial days can distort the average.
- Boundary consistency: Recalculate after changing the chart time zone (or the “day” definition). If ADR changes materially, your day boundary choice is influencing the result.
Relevant limitations and risks (uncertainty)
ADR is descriptive, not predictive. Even when calculated correctly, it does not guarantee future movement size.
Key limitations to keep in mind:
- Non-stationarity: Market conditions change, so the average from the past may not match the next period.
- Definition sensitivity: Different “day” boundaries and different range definitions (for example, using only certain session hours) can produce different ADR values.
- Outliers: A few unusually wide days can raise ADR, especially with short N.
Because there are multiple legitimate choices for day boundaries, range measures, and window length, two traders using different settings can compute different ADRs from the same general concept.