The Daily Range Projections indicator displays support and resistance levels based on the volatility of the prior N days. The noise bands show how far noise trader typically drive prices. A breakout from these levels will indicate participation from higher timeframe traders, bringing Range Projections, i.e. profit target bands, into play.
Indicator Description
The Daily Range Projections indicator calculates Average Daily Noise (ADN), Average Daily Range (ADR) and Average Daily Expansion (ADE) bands. Accordingly, the Daily Range Projections is also sometimes referred to as an ADR indicator. For a quick intro video to the concept, check out this Indicator Spotlight Post (with video).
You will find the “daily noise” levels by determining the smaller of (High – Open) and (Open – Low). The upper band is located by adding the expected noise to the current open. Conversely, the lower band is located by subtracting the expected noise from the current open.
The Daily Range Projections are targets that come into play once the price has broken outside the noise bands. There are two ways of determining the targets:
- The average daily range over N days added to the current low (high projection) or subtracted from the current high (low projection).
- Daily expansion from the open Max(High – Open, Open – Low) averaged over N days and added to and subtracted from the open.
The ADR indicator will also display the opening gap, which may be calculated from the daily close.
How to read Average Daily Range Projections
Our Range Projections indicators is built on the same logic as other library session indicators. The Open, High, Low and Close levels can therefore be located by using either daily- or intraday data. Of course, daily data reflects the contractual settings of the instruments, accounting for extended sessions that occur with public holidays. Therefore, the daily data option is the default setting.
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.
Other Library Indicators
Our standard momentum oscillators category feature a number of other entries, such as the Acceleration Deceleration and the standard Stochastics. We also have a category for advanced oscillators, with among others the Projection Oscillator and the SVE Stochastics ITF. These tools build on the same concept as the standard momentum oscillators, but with a higher degree of sophistication. In general, they allow for added value approaches, utilizing a set of more complex algorithms.
The Daily Range Projections is available for NinjaTrader 8. The indicator library also features Range Projections Weekly and Range Projections Monthly. Finally, a separate Range Analysis indicator can also be used to determine a higher timeframe consolidation / contraction period, as discussed in our Indicator Spotlight on the Opening Range Breakout Strategy.
