The Daily Range Projections

Average Daily Range for NT8

In this month’s Indicator Spotlight, we’re looking at the Daily Range Projections. They display support / resistance levels based on the volatility of the prior N days, namely average daily noise and average daily range projections. To learn more, watch the video, or continue reading below:

Daily Range Projections Indicator Spotlight

The Noise Bands

The daily noise is defined as the smaller of (High – Open) and (Open – Low) averaged over N days. Therefore, upper band is calculated by adding the expected noise to the current open, whereas the lower band is found by subtracting it. A significant push is required in order to break these levels. Accordingly, if the market moves beyond the noise bands, it indicates participation from higher timeframe traders.

The indicator is built on the same logic as the session indicators and you may choose to pull the OHLC data from daily data, as well as intraday. Of course, daily data reflects the contractual settings of the instruments, accounting for extended sessions that occur with public holidays. Accordingly, the daily data is set as the default setting.

Average Daily Noise Levels
Average Daily Noise and Extension Levels

Targets and Average Daily Range Projections

Targets and Average Daily Range Projections come into play once the price has broken outside the noise bands. There are two ways of calculating the targets:

  • The Daily Expansion Bands, namely the larger of (High – Open) and (Open – Low) averaged over N days, showing us the average expansion beyond the daily noise.
  • The Average Daily Range, namely adding it to the current low (high projection), or subtracting it from the current high (low projection). The bands will auto-adjust to the current day’s high and low until the expected daily range is reached. Once that occurs, the bands will freeze.
Average Daily Range for NT8
Average Daily Range Bands

Trading the Average Daily Range

Markets are in ranging mode some 80% of the time and it’s generally a good idea to watch how the market interacts with the average daily noise levels. For example, you may want to look for price rejection, i.e. spike/reversal patterns at the first test of the ADN high or low bands. Conversely, if we break beyond the average daily noise, it points to institutional participation. In this scenario we should be looking for momentum entries, using for example the Ichimoku indicator, which we featured in our previous spotlight.

Conclusion

The Daily Range Projections indicator tracks the average daily noise and possible targets. There are two ways of determining targets: Daily Expansion Bands and Average Daily Range. Apart from the Daily Range Projections, the indicator library also offers Weekly Range Projections and Monthly Range Projections, allowing you to review whether to look for reversal or momentum entries in multiple time frames.

The indicator is available for NinjaTrader 8.