DislikedThanks Zander.
I am following all the ADR trades posted and still learning and will figure out the LOGIC.
I know from PA and the 10EMA there is a LOGIC behind. I will need more time to convince myself how to trade such conditions.
But I observe that the ADR indicator used by many in this thread has certain behaviour. See my comments made on your posted chart.
[size=3]The ADR High was not at that level when day open. It moved down after price made...Ignored
I dont mean to be condesending i will just explain what i think the ADR is, i may be wrong. i think you understand the first part but i am also unsure of the second part
my newbie perception of the ADR is that the pip distance between the high and the low does not change from the beginning of the day to the end of the day but it does change day to day. lets say that ADR is at 60 pips if the price went down as soon as the first 15min candle opened and continued 60 pips then the ADR high level would be at the start of the day which is the open and both lines would turn red, the other line would be at the 60 pip point. when this is reached then the lines are set and do not move. another example is that if the the first few candles went down by 59 pips the marker would not turn red and still be able to move as 60 pips hasnt been reached. if the market then changed direction it would have to move 60 pip upwards for the ADR high to be reached so it would only be 1 pip above the open but the daily movement has been reached. if this happens then the ADR low then moves up 1 pip to where the daily low is and sets as the distance between the two ADR markers are always the same.
this part im unsure of:
why does it work? these trades have been posted here many times with success and it seems to be to much of a coincidence. i would not take a trade on the backing of it has just reached ADR as ADR can be set back to however many days and it depends when the broker starts the new day. the ADR can be used as a guide to say over the past 30 days average is 60 pips per day. this is then where i see a bit of logic. if you are a big time day trader and you think the price will go down. you want the most you can get so you look back and on average it moves 60 pips a day the last 30 days so it makes sense to set TP at 60 pips or just above.
my question is, is the ADR relied on so much that it actually moves the market?
if the answer is yes then different brokers will have different ADRs thats why the price usually reaches ADR or just misses it and reaches a RN it then stalls as many traders are taking profit. then this leads to price slowing. psychologically people think this is a reversal and the market wont move in that direction any further and trade opposite which creates the ADR bounce. of course there are days when the price bypasses ADR and doesnt even stall but the bounce has happenned many times. Just my opinion i could be way off!
If anyone else could shed more light on this it would be helpful
zander