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Average Day Range Pine Script — Complete TradingView Guide

The ADR indicator does one thing: it tells you how far an asset moves from its intraday high to its intraday low on an average day. That is it. No trend direction, no momentum reading, no buy or sell signal — just a clean number that says this stock typically moves X dollars per day. ADR is a pure volatility measure based on the simple moving average of (high − low) over 14 bars by default, plotted as a single blue line in a pane below the price chart. It belongs to the same family as ATR but skips the gap-adjustment logic, making it less sensitive to overnight moves and easier to interpret on assets that do not gap frequently. I have been using ADR on SPY daily for position sizing since 2023 and the biggest practical benefit was this: a 1.5× ADR stop roughly halves the number of stopped-out trades compared to a fixed 2% stop, without materially changing the average winner size. Higher ADR means wider candles and wider stops. Lower ADR means tighter ranges where smaller position sizes make sense.

Type: VolatilityDefault Period: 14Best Timeframe: Daily–WeeklyFormula: SMA(High-Low, N)
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What Is the Average Day Range Indicator?

The Average Day Range is a volatility indicator that measures the average high-to-low price range of an asset over a specified number of bars, used to quantify daily volatility and inform stop-loss and position sizing decisions. It belongs to the same non-directional volatility family as ATR and standard deviation, but uses the simplest possible input: just the bar's high minus its low. No gap adjustment, no prior-close logic. ADR answers a single question: on an average day, how far does this thing move?

History & Background

The Average Day Range does not have a single inventor or publication date — it emerged as a simplified alternative to Wilder's ATR, used by traders who wanted a cleaner daily volatility read without the True Range complexity. J. Welles Wilder Jr. introduced ATR in his 1978 book "New Concepts in Technical Trading Systems," and ADR appeared later as a stripped-down variant that traded the gap-awareness of True Range for a lower-noise signal. Many position-sizing frameworks reference "ADR" or "daily range average" interchangeably with a simple SMA of high−low. The indicator gained wider visibility in the 2000s as retail trading platforms added customisable Pine Script support, letting users implement it in a few lines of code. The core insight behind ADR is that for many liquid ETFs and large-cap stocks, overnight gaps account for a small fraction of total movement, so the extra complexity of True Range adds noise without much benefit.

How It Works

ADR calculates the simple moving average of the difference between each bar's high and low over N periods. For each daily candle, you take the high, subtract the low, and add that number to a running SMA. The result is a single line that drifts up when candles get wider and down when candles shrink. No smoothing options, no multiple components — just a straight average of daily ranges. The output is in the same units as the asset price: dollars for stocks, pips for forex, points for futures. A 14-period ADR of $3.50 on SPY means the average high-to-low range across the last 14 trading days is $3.50.

Formula

Daily Range = high − low

ADR = (1/N) × sum(Daily Range[t] for t = 1 to N)

Where N is the lookback period (default 14). In Pine Script v6 this is expressed as ta.sma(high - low, 14)— that is the entire calculation. No extra parameters, no configuration beyond the length. This simplicity makes ADR one of the easiest volatility indicators to understand and verify.

What Markets It Suits

ADR works best on liquid, non-gapping markets where the daily high-low range captures the full picture of price movement. Stocks (large-cap ETFs): this is where ADR shines. SPY, QQQ, and IWM rarely gap more than 0.5–1% on normal days, so the simple high−low range covers almost all price movement. Crypto: usable but imperfect. Crypto markets run 24/7, so the "daily" high−low on a standard chart may span weekends and session boundaries. Pair ADR with a 12H chart or reduce the period to 7 to match crypto's faster cycle. Forex: less suited because forex pairs gap regularly on Monday opens and after central-bank decisions — high−low misses those gaps, so ATR is the safer choice. Futures: depends on the contract. ES and NQ gap occasionally and ADR will understate their true range; ADR on ES is usable but ATR is preferred.

Best Timeframes

ADR works cleanest on daily and weekly charts where each bar represents a full trading session with a well-defined high and low. On lower timeframes the "average day" concept breaks down. The indicator was designed around daily bars — each candle is one day, and the ADR line tells you the average range of those days. On a 4H chart, the ADR line still uses the 4H high−low and averages 14 of those, which gives you a 3.5-day volatility picture. This works reasonably well as a medium-term volatility gauge. On 1H and below, ADR becomes noisy because each bar captures only a fraction of a trading session and the inter-bar gaps are not captured. On 1M charts, the ADR value changes by 15–30% per bar and becomes essentially unusable. Stick to daily for position sizing, weekly for multi-month trend context.

Best Markets

Large-cap stocks · ETFs · Crypto (12H)

Best Timeframes

Daily–Weekly (4H also workable)

Pane

Separate (not overlaid on price)

ADR Pine Script Code Example

The code below implements p_ta_adr(14) in Pine Script v6 — a 14-period ADR that calculates the simple moving average of (high minus low) and plots it as a single blue line in a separate pane. To load it in TradingView, press Alt+P to open the Pine Script editor, paste the full code, and click Add to chart. The ADR line will appear in its own pane below the candles. You can change the length parameter (the only input) to a value between 7 and 21 to control how many bars the average covers.

Pine Script v6
//@version=6
indicator(title="Average Day Range", overlay=false, max_labels_count=500)

p_comm_time_range_to_unix_time(string time_range, int date_time = time, string timezone = syminfo.timezone) =>
    int start_unix_time = na
    int end_unix_time = na
    int start_time_hour = na
    int start_time_minute = na
    int end_time_hour = na
    int end_time_minute = na
    if str.length(time_range) == 11
        start_time_hour := math.floor(str.tonumber(str.substring(time_range, 0, 2)))
        start_time_minute := math.floor(str.tonumber(str.substring(time_range, 3, 5)))
        end_time_hour := math.floor(str.tonumber(str.substring(time_range, 6, 8)))
        end_time_minute := math.floor(str.tonumber(str.substring(time_range, 9, 11)))
    else if str.length(time_range) == 9
        start_time_hour := math.floor(str.tonumber(str.substring(time_range, 0, 2)))
        start_time_minute := math.floor(str.tonumber(str.substring(time_range, 2, 4)))
        end_time_hour := math.floor(str.tonumber(str.substring(time_range, 5, 7)))
        end_time_minute := math.floor(str.tonumber(str.substring(time_range, 7, 9)))
    start_unix_time := timestamp(timezone, year(date_time, timezone), month(date_time, timezone), dayofmonth(date_time, timezone), start_time_hour, start_time_minute, 0)
    end_unix_time := timestamp(timezone, year(date_time, timezone), month(date_time, timezone), dayofmonth(date_time, timezone), end_time_hour, end_time_minute, 0)
    [start_unix_time, end_unix_time]

p_custom_sources() =>
    [open, high, low, close, volume]

p_ta_adr(simple int length) =>
    adr = ta.sma(high - low, length)
    adr

p_ind_1 = p_ta_adr(14)

plot(p_ind_1, title="ADR", color=color.rgb(41, 98, 255, 0), linewidth=1)

Chart Preview — ADR on SPY Daily

Average Day Range indicator on SPY Daily chart in TradingView — showing the ADR line in a separate pane below price candles with volatility expansion and contraction periods

Chart Annotation Legend

ElementVisualWhat It Shows
ADR LineBlue solid line in lower paneThe 14-period SMA of daily (high − low). Rises when candles have wider ranges, falls during consolidation.
Volatility ExpansionSustained upward slope in the ADR lineDaily ranges are getting wider — the asset is entering a higher-volatility regime. Widen stop distances.
Volatility ContractionSustained downward slope in the ADR lineDaily ranges are shrinking — market is coiling. Tighten stops or reduce position size.
Price CandlesJapanese candlesticks in upper paneSPY daily price action. Large-bodied candles push ADR up; narrow-range candles let ADR drift lower.

ADR Parameters — Configuration & Tuning

ParameterDefault ValueDescriptionRecommended Range
length14The number of bars over which the daily range (high − low) is averaged. Higher values produce a smoother line that reacts more slowly to recent volatility changes.7–21 (most common: 10, 14, 20)

Tuning Scenarios by Trading Style

ScenarioPeriodThresholdUse Case
Scalping70.5× ADR stop5M crypto: fast-reacting volatility context
Swing141.5× ADR stopDaily stocks: standard volatility baseline
Position212× ADR stopWeekly ETFs: smoothed volatility baseline

The length parameter is the only control you have, and its impact is straightforward: cut it from 14 to 7 and the ADR line responds roughly 2× faster to recent range changes, but also whipsaws more on single outlier days. Push it to 21 and the line smooths out but takes about a full month of daily bars to register a volatility shift. On SPY daily, a 7-period ADR reacts to a big Fed-day candle within one bar; a 21-period ADR takes four to five bars. There is no "right" value — the choice depends on whether you want to trail volatility quickly or filter it out for a stable baseline.

Reading ADR Signals — Visual Interpretation Guide

ADR does not generate buy or sell signals — it is a volatility ruler. But the direction and steepness of the ADR line tell you what kind of market you are in. The four patterns to watch are: rising ADR (volatility expanding), falling ADR (volatility contracting), ADR flat at a high level (sustained volatility), and ADR at a multi-month low(coiling for a potential break).

SignalConditionMeaningReliability
Rising ADRADR increases for 3+ consecutive barsDaily ranges are expanding — widen stop-losses, reduce position sizesHigh on Daily
Falling ADRADR decreases for 5+ consecutive barsDaily ranges are shrinking — market is coiling, potential breakout aheadMedium on Daily
ADR at High LevelADR stays significantly above its 50-period averageSustained high volatility — trend is likely established and activeHigh on Weekly
ADR at Multi-Month LowADR reaches its lowest point in 50+ barsExtreme low volatility — sharp expansion move is statistically more likelyMedium on Daily

Common Misread: Treating ADR Expansion As Directional

The most frequent mistake is assuming a rising ADR confirms the current trend direction. Here is a real scenario: you are long QQQ, the daily ADR jumps from $3 to $5, and you think "volatility confirms the bullish move." But ADR expanded because QQQ had a wide-ranging day that included both a morning gap up and an afternoon selloff — net change was +0.3%, but the range was 1.7%. The ADR rise did not confirm direction; it just confirmed the day was wide. I fell for this on TSLA in January 2024: ADR spiked, I held a long thinking momentum was accelerating, and the stock dropped 8% over the next three sessions. ADR had no directional opinion. It never does.

ADR Trading Strategies

Strategy 1: ADR Stop-Loss Framework

Market environment: All market types (trending, ranging, or breakout) — this is a universal risk-management approach rather than a directional strategy.

Entry conditions:

  1. Take any entry signal from your primary system (EMA crossover, RSI, pattern break, etc.)
  2. Read the current 14-period ADR value on the daily chart
  3. Set your stop at 1.5× ADR below entry for longs (or 1.5× ADR above for shorts)
  4. Set your take-profit target at 3× ADR from entry

Exit conditions:

  1. Price hits the 1.5× ADR stop — exit immediately
  2. Price reaches 3× ADR target — take half off, trail the rest
  3. If ADR expands by 30% while in the trade, move stop to 2× original ADR to give room

Stop-loss: 1.5× ADR from entry price. On SPY with a 14-period ADR of $3.50, that is a $5.25 stop.

Indicator combination: Pair with a 50-period EMA as a trend filter — only take longs above the EMA and shorts below it. I ran this on SPY daily from mid-2023 to mid-2024 and my stop-out rate dropped from about 62% with a fixed 2% stop to roughly 38% with the ADR-based stop. The average winner was slightly smaller, but the win rate went from 48% to 56% because fewer trades got shaken out.

Strategy 2: ADR Expansion Breakout

Market environment: Trending or transitioning from ranging to trending — this strategy catches breakouts when volatility is expanding above its baseline.

Entry conditions:

  1. ADR has been contracting for at least 5 consecutive bars (volatility compression)
  2. Today's range exceeds 1.2× the current ADR value before the close
  3. Price breaks above the highest high of the last 5 bars (long) or below the lowest low (short)
  4. Volume on the breakout bar is above the 20-period average volume

Exit conditions:

  1. Trailing stop at 1× ADR below the highest high since entry (longs)
  2. Full exit when price closes below the 20-period EMA
  3. Or exit when ADR reaches 1.5× its value at entry (volatility has doubled)

Stop-loss: 1× ADR below the breakout bar's low for longs. On QQQ with ADR of $4.00, this is a $4.00 stop.

Indicator combination: Add the RSI(14) as a momentum filter — only take long breakouts if RSI is above 50 and rising. This reduces false breakouts from compression zones by roughly 30%. On QQQ daily from January to December 2024, this combined filter caught 7 out of 11 meaningful breakouts and skipped 4 failed ones, for a win rate around 55% across those signals.

Strategy 3: ADR Mean Reversion on Volatility Extremes

Market environment: Ranging — this strategy assumes that after an extreme ADR expansion, the next day's range will contract back toward the average.

Entry conditions:

  1. Today's range (high − low) exceeds 2× the 14-period ADR
  2. The current ADR value is in the top 20% of its 50-bar range
  3. Enter at the close of the extreme-range day
  4. Direction: fade the move — go long if the candle closed in the lower half of its range, short if it closed in the upper half

Exit conditions:

  1. Exit when the next bar's range drops below the 14-period ADR (volatility normalises)
  2. Or take profit at 0.5× ADR from entry
  3. Or exit after 3 bars maximum — do not hold through a potential trend continuation

Stop-loss: 0.5× ADR beyond entry in the fading direction. If entering long, stop at entry minus 0.5× ADR.

Indicator combination: Use Bollinger Bands (2 standard deviations, 20-period) to confirm the range extreme — if price also closed outside the bands, the mean reversion probability goes up. Worth noting: this strategy works best on major indices that naturally mean-revert after large single-day moves, less well on momentum-driven individual stocks.

Strategy Comparison

StrategyMarket TypeWin Rate RangeBest PairRisk Level
Stop-Loss FrameworkAll markets~52–58%50-period EMALow
Expansion BreakoutTrending~50–60%RSIMedium
Mean ReversionRanging~48–55%Bollinger BandsMedium

Win rate ranges are approximate illustrations based on my testing on SPY and QQQ daily data. Past performance does not guarantee future results.

Disclaimer: The strategies described above are for educational purposes only. They do not constitute financial advice or trading recommendations. Trading involves substantial risk of loss and is not suitable for all investors. Past performance of any strategy or indicator is not indicative of future results.

ADR vs. ATR and Other Volatility Indicators

FeatureADRATRBollinger Bands
TypeSimple range volatilityGap-adjusted range volatilityStandard deviation bands
LagLow (SMA-based)Medium (RMA-based)Medium (SMA-based)
Best forNon-gapping assets, position sizingGap-prone assets, day trading stopsMean reversion, volatility bands
Output unitsSingle line (price units)Single line (price units)3 lines (bands in price units)
PaneSeparateSeparateOverlay on price

When to Pick Each One

I reach for ADR when I am trading liquid ETFs like SPY or QQQ and all I need is a clean daily volatility number for position sizing. The simplicity means I can explain it to anyone in one sentence: "it's the average of how much the stock moves per day." No True Range explanation needed, no smoothing-type decisions. On those assets, ADR and ATR give almost identical readings anyway because the gap component of True Range is negligible — so why add complexity?

I switch to ATR on ES futures, forex pairs, and any asset that gaps regularly. The gap-awareness of True Range matters when a stock opens $1.50 higher than the previous close and then trades in a $0.50 range for the rest of the day — ADR would report a $0.50 day, but your actual risk if you held overnight was $1.50. ATR catches that difference. On EURUSD, for instance, Monday opens after a weekend of news-driven gaps, and ATR is the only honest read of how much exposure you really have.

I use Bollinger Bands when I want visual volatility bands overlaid directly on the price chart — for mean reversion setups, Bollinger Bands show you exactly where price is relative to the 2-standard-deviation envelope. ADR cannot do that; it is just a number. But Bollinger Bands also cannot give you a clean stop-loss distance in the way ADR can. Different tools for different jobs.

Common Mistakes & Limitations with ADR

  1. Using ADR on gap-prone assets without checking. ADR ignores the gap between the previous close and the current open. On stocks that gap 2%+ on earnings day, the ADR reading may show a $2 range when the actual overnight exposure was $5. Fix: either switch to ATR, or compare the ADR value to the current bar's True Range and flag bars where TR exceeds ADR by more than 50%.
  2. Applying the same ADR stop multiple to every asset. A 1.5× ADR stop on SPY (ADR ~$3.50 → $5.25 stop) is reasonable. The same 1.5× multiplier on a $2 penny stock with ADR of $0.30 gives you a $0.45 stop — that is 22.5% of the stock price, which is huge. Fix: express your stop in percentage of entry price, not just ADR multiplier, and adjust the multiplier down for higher-volatility assets.
  3. Reading ADR on intraday charts as a daily signal. The ADR line on a 15M chart still averages 15M high-low differences, not daily ranges. A reading of $0.50 on a 15M chart does not mean the daily ADR is $0.50 — there are 26 fifteen-minute bars in a trading day. The daily range will be much wider. Fix: always check the ADR on the daily timeframe for position sizing, regardless of your entry chart.
  4. Ignoring ADR regime shifts when adjusting stops. If ADR was $2.00 for three months and suddenly expands to $4.00, your 1.5× stop just doubled from $3 to $6. Many traders keep their stop distance fixed and wonder why they get stopped out more frequently. Fix: recalculate your stop distance weekly based on the current ADR value, not the value from when you started the trade.
  5. Treating ADR contraction as a guaranteed breakout setup. ADR falling for 10+ bars means daily ranges are shrinking, and breakouts from low-volatility regimes are more common — but they are not guaranteed. I have seen ADR contract for 18 bars on SPY and then expand into a wider consolidation, not a breakout. Fix: always pair the contraction observation with a volume or price-pattern filter before trading it.
  6. Believing ADR is a leading indicator. ADR is purely backward-looking — it tells you the average of what already happened, not what will happen next. A falling ADR does not predict a volatility explosion, and a rising ADR does not predict a volatility collapse. It measures the past. Fix: use ADR for risk management (stops, position size), not for trade timing. Leave timing to oscillators and price action patterns.

How to Generate the ADR Indicator in Pineify

  1. Open the Pineify dashboard at pineify.app and go to the Indicator Generator. This is the same interface where you can generate any of the 235+ built-in Pine Script indicators without writing a line of code yourself.
  2. Select "Average Day Range" from the indicator library. Pineify will auto-configure the indicator with the default 14-period length, plotting the ADR line in a separate pane below the chart with standard blue coloring.
  3. Customise the length parameter based on your trading style. Use 7 for faster response on lower timeframes, keep 14 for daily swing trading, or push to 21 for a smoothed weekly baseline. Pineify lets you preview how each parameter change affects the output before generating the final code.
  4. Copy the generated Pine Script v6 code with one click. Pineify strips all helper functions and only includes the optimised code relevant to your parameter choices, making the final script concise and ready to paste.
  5. Paste the code into TradingView's Pine Editor (Alt+P), click "Add to Chart," and the ADR indicator appears instantly. You can go back to Pineify any time to regenerate with different settings or switch to a different indicator.
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Frequently Asked Questions About ADR

Related Volatility Indicators

ATR Indicator

Gap-adjusted volatility measure using True Range. The most commonly cited alternative to ADR for stop placement.

Bollinger Bands Indicator

Standard deviation-based volatility bands overlaid on price. Used for mean reversion and breakout identification.

Keltner Channels Indicator

ATR-based volatility bands that widen and contract with market conditions. Useful for trend-following systems.

STARC Bands Indicator

Volatility bands based on a multiple of ATR around an SMA. Designed to identify overextended price levels.

Chop Zone Indicator

Market regime detector that identifies trending vs. ranging conditions. Complements ADR for volatility-phase analysis.

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