So ADR is a mean of a range of days... say that 5ADR is the mean of how much the price has moved for the last 5 days...
say that it's 100 pips, just to humor ourselves...
the indicators that I enjoy the most, also plot this range on the chart...
my question is:
Can anybody explain that top me??
A bit hard to explain, sorry.. but here is a picture...
See how the amot of pips from the price, to the top and bottom of the ADR is different...and I wondered why.
I have now understood that the price actually starts in the middle of the range (Is that correct?), but then, if the price moves upwards, the bottom level of the ADR "catches up", to keep the distance the same as in the beginning, while the top one stays the same (and vice versa if the price moves downward). And that when the price actually touches one of the levels, they become static.
Am I correct in this? because I'm not really sure at all...
On my image, the price has actually moved downward, so if my statement above was true, then the distance to the lower level av the ADR should have gotten smaller since the start of the day, but it has actually grown, while the distance to the top has shrinked. And that suggests the opposite to what I said above... and also, if the distance to the downward range level continues to grow when price falls, how is reaching the level??
nevr mind, I think... I should have concentrated on the _current_ price and not on what it was when day started.. then my statement seems more correct actually? :D
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