Setting Intraday Targets With Average Daily Range
What to aim for when price is at all-time highs,
and you've got no levels to work off
SIMPLE TARGET METHOD
So that’s billions spent, and here we are again. The market is testing that 160 line in the sand… like playing chicken with a central bank…
When you don’t have any levels to work off, and you’re used to working with support and resistance, when the markets have no ceiling, it can throw you off your game a bit.
So here’s a potential quick fix…
Let’s say you’ve identified a major level of support; it aligns with your playbook, and you want to take it.
Only one problem: you don’t know where to put your target.
Quick solution: Take the Average Daily Range and use 75% of that as your price target.
So, if the range of the S&P 500 is running at 80pts, 75% of that is 60pts.
You’d calculate 60pts from the current low of the day (not your trade) and use that as your target… (see the chart above)
If you think we’re in volatility expansion, you can even go 100%
The beauty of this method is you are making some assumptions:
- The low of the day is already in (for longs)
- The trend will continue
- The range will be similar to the average
Which aren’t unreasonable. If you’re wrong, you still get stopped as usual…
This method won’t work if the average range has already been done on the day, or even nearly done; if that’s the case, you need something else to structure the trade.
But, if the market is yet to do its typical range, and you have no reason to think it won’t, then it’s as good a target as any…
Just don’t forget your stop and RvR requirements.
More detail on using ATR in this webinar recording.