Daily Range Indicator for Metatrader 5

January 7, 2015

911

Daily Range Indicator is a powerful tool designed for traders using the MetaTrader 5 platform. It provides valuable insights into the potential price movements of a financial asset within a single trading day. By analyzing historical data and current market conditions, this indicator projects the high and low price levels expected for the upcoming day.

Daily Range Indicator Importance

The Daily Range Indicator plays a crucial role in intraday trading strategies. Here’s why it’s significant:

Intraday Insights: Traders rely on this indicator to gain insights into potential price movements within a single trading day. By understanding the projected high and low levels, they can make informed decisions.

Risk Management: Knowing the expected price range helps traders set appropriate stop-loss and take-profit levels. It enhances risk management by allowing them to adjust position sizes accordingly.

Volatility Assessment: The indicator provides a snapshot of market volatility. Traders can gauge whether the day is likely to be calm or volatile based on the projected range.

Daily Range Indicator Example

The Daily Range Indicator provides projections for the high and low price values of a financial asset within the current trading day. It takes into account both yesterday’s completed candlestick and today’s candlestick parameters. The indicator calculates tomorrow’s price range based on the ratio of the current day’s Close and Open prices. Three possible relations exist:

If Close [0] < Open [0], then X = (High1 + Low 1 + Close 1 + Low 1) / 2.
If Close [0] > Open [0], then X = (High1 + Low 1 + Close 1 + High 1) / 2.
If Close [0] = Open [0], then X = (High1 + Low 1 + Close 1 + Close 1) / 2.

Here:

Open [0], High [0], Low [0], and Close [0] represent current-day prices.
Open 1, High 1, Low 1, and Close 1 correspond to yesterday’s prices.

The estimated low price for tomorrow is Min = X – High 1, and the estimated high price for tomorrow is Max = Low 1 – X. This indicator can be generated for any chart bar, providing a comprehensive view of market behavior relative to the indicator levels at each bar. Its most suitable application lies in offline strategy analysis.

Advantages & Disadvantages

Advantages

Intraday Insights: The Daily Range Indicator offers intraday traders valuable insights into potential price movements within a single trading day.
Visual Clarity: By plotting the projected high and low levels on the chart, traders can easily visualize potential price ranges.
Strategy Development: Traders can use this information to fine-tune their trading strategies based on expected price volatility.

Disadvantages

Historical Data Dependency: The indicator relies on historical data (yesterday’s prices) for its calculations, which may not always accurately predict future price ranges.
Market Volatility: Sudden market shifts or unexpected news events can render the projected ranges less reliable.
Overfitting Risk: Depending solely on this indicator for trading decisions without considering other factors may lead to overfitting.

How to Trade with Daily Range Indicator

Buy Entry

Enter long when the current price approaches the lower end of the daily range.
Set a stop-loss below the daily range low.
Take profit near the upper end of the range.

Sell Entry

Enter short when the price nears the upper end of the daily range.
Set a stop-loss above the daily range high.
Take profit near the lower end of the range.

Conclusion

Daily Range Indicator for MetaTrader 5 is a powerful tool for traders seeking to understand market volatility and optimize their trading decisions. By incorporating it into your analysis, you can enhance your trading strategies and make informed choices based on price movement patterns.