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00:00and we are live folks happy sunday big big gap up
00:09almost 100 points gap up which is more than the range of the whole last friday so that's kind
00:16kind of funny but that's not why we are here today today we are here to discuss about
00:24the average daily range framework that i use in my everyday trading so you most likely have seen it
00:36already in my day trading template but it's kind of the same approach for the scalping template even
00:45though i don't talk too much about it because it became kind of natural for me to use it but i will
00:52still go through what i use and how i use it so the adr average daily range first of all
01:05is just the sum of the high minus the low uh of on the daily candles and then you can use adr5
01:17adr10 adr20 so for me i use adr5 so i divide that sum by five and it gives me a number
01:25which you can see on my template at the top right currently it's sitting at 175
01:34which means that on average over the last five trading days the daily range has been a hundred and
01:4017.5 points which is not a lot when you see that nq is trading at eighteen thousand five hundred so it's
01:48less than one percent basically so it's definitely a low value if we compare that to the restore call
01:56numbers that we that we've had especially for an index such as nq and so there's a lot of people using
02:06adr of course a lot of benefits to using adr the first one is that it's very simple the calculation
02:15the mathematics behind again is just the sum of the high minus the low divided by 5 10 20 whatever
02:22look back period you want to use the second thing is that it's universal so you can use that on stocks
02:30and crypto and whatever you want something that trades by definition is going to move so you're
02:37going to have a daily range that you can rely on so the goal of today's presentation is to see if there
02:46are some edge in using the adr so when you use the adr what you can see on my screen now is two bands
02:55so adr plus which is this one at the top and adr minus which is the one at the bottom
03:03so the way i calculate them there's probably other ways but i guess there's not like a million different
03:09ways to do it is that i take the close of the previous day and i add the average daily range divided
03:17by two to that previous daily close and it gives me the adr plus and i do the same to get the adr
03:25minus i take the close up from the previous day and i subtract the adr divided by two so in that case
03:32let's say for friday i would take the close so the 4 pm value of first day well wednesday since friday
03:40was bank holiday so of wednesday and i would add 175 divided by 2 which would give me here 18 590
03:50and same for adr minus and what we can see here just for the last couple of days is that
03:59here we have adr plus on wednesday and that was basically the high of the day
04:05same for tuesday here the high of the day was here and adr plus was here
04:10on monday adr minus was here and the low of the day was here so very frequently adr plus or adr minus
04:22are gonna be close to the local high or low for the day and that's why i love to use it but of course
04:32don't believe me as usual uh just believe the the numbers uh that you get through backtesting that's
04:40what we will uh dive in in the coming i was about to say slides but i don't do slides anymore so in the
04:50coming minutes so the first steps let's see what are the daily ranges in 2024 for nq
04:59you know you this i mean there's not a lot of like serious people i guess on on twitter
05:07but there's a few of them that use uh the daily ranges uh there's quite a few famous people so for
05:13me it's uh metal who introduced me to to this uh to this concept like three years ago and uh since
05:21then i've stuck with it and i've done a lot of statistical analysis on it
05:26and so the first thing is don't believe what people say on daily range do the work for yourself
05:34or you can use my work here but as usual i would advise you to to do your own research so here we have
05:42the daily range in 2024 for nq i like to split it between monday and tuesday in one color and then
05:49wednesday to friday in a different colors because usually we don't have the same type of volatility
05:56during the second part of the week than during the first part of the week especially in 2024
06:04but once again if you have beliefs about adr be careful so what do we see on this graph first of all
06:16it's in points because uh the index we are looking for at the moment nq is trading us basically 18 000
06:25since the beginning of the year so it makes sense to talk in points and not in percentage but if you
06:32start looking back at a larger period of time let's say two three four years then it makes absolutely no
06:38sense to sense to talk in points because well nq was trading at 10 000 a year and a half ago so
06:48200 points is not the same today when it's trading at 18 000 than when it's trading at 10 000
06:58that's why we need to use the percentage view but for 2024 it's fine to use points
07:03and so basically we can see all the weeks since the beginning of the year so of course the last week
07:11here that you can see on the right is just uh four days because friday was a bank holiday and similarly
07:18for the first week of the year uh well the the first monday of the year was a was a bank holiday as well
07:25and so what do we see we see that we have a lot of like bars between 150 to 200 points seems to be
07:40kind of the average of the sample that we have here we can also see a few spikes at 400 points for
07:47like the first day of the year then the second monday of the year as well we have a spike here
07:56that was mid february on the tuesday and then we had this week that was quite volatile
08:04with three instances of trading range above 350 points
08:10and of course last week which is one of the lowest volatile week on like the historical data set that
08:21i have with first day closing in on a incredible 92 point range which is absolutely insane for
08:33a full day with i think two red for the news which are not as big as fomc and stuff but still kind of
08:40crazy when you think about it so last week was historical in terms of low volatility for nq
08:48and so then what else do we see so first of all we see that there's kind of some pattern you know like
08:54most of the time we are around 200 points which in itself gives you precious information
09:01because when the range let's say at like right before the open is already at like 190 points
09:09well you know that potentially the whole range for the day has already been done or almost maybe we're
09:14gonna have a little spike at the at the open and then we're gonna reverse so that's one of the first
09:21instances where i can use this framework to look for reversal point intraday
09:28which is something i use for my trade live on wednesday
09:38and then
09:40do we see some differences between the orange and the green
09:42because we often say friday is the most volatile day monday is the least volatile day of the week
09:50why here we have a monday very volatile uh here we have a tuesday very volatile this one is a tuesday
09:56as well this one is a tuesday tuesday tuesday so uh monday sorry for this one so we have
10:04canada volatile days in 2024 during the first half of the of the week
10:12um and you know of course except last week which was kind of catastrophic for
10:18like monday or thursday like each day was terribly low but that's the first thing is to give you an idea
10:25of like what are the ranges this year and per week and um day of the week as well
10:34number two now we will see that in terms of percentages
10:38so now i'm just dividing that by the close of the previous day just to to get this adr in terms of
10:46what is daily range in terms of percentage and so i've put out one percent the red line
10:52not because it's the average over uh 2024 but just because it's a good one percent daily range is
11:00historically low for nq but for this year it seems actually quite high which is crazy
11:09and so one percent if you look at that in the last three weeks so three weeks is kind of a lot
11:14there's only one two three days where we cross that and when we cross it we just crossed it by like
11:190.2 percent so it is really insane and it means that each time over the last three weeks like
11:29ADR plus or ADR minus has been offering really good entries for intraday reversal
11:38and even if we go to like two percent uh it can still offer a good uh intraday reversal but we'll
11:45discuss that a bit a bit later because you have to keep in mind that
11:51the average daily range is all of these so if if i go on my on my chart here
11:59like the daily range is all of this but in the case of like a trend day we could do
12:06the currently like 100 so 175 points but we could do them straight from the open so if we go straight
12:14from the open here we can go up to here and then start reversing like if we don't kind of eat
12:22like the bottom part and we have a directional day we will get above that ADR plus quite quite easily
12:32and in that case the reversal point would be at a different place
12:41and so kind of the same conclusion as in the in the previous graph is that the volatility has not been
12:49great the last three weeks and in in terms of percentage when you think about it it's not that
12:56high like one percent or 180 points is quite low to have like big reversals but also it's plenty of
13:06points for scalpers to make like 10 points 15 points 20 points uh scalping so okay for like people
13:13who are looking for like 100 points move it's not great at all but for people looking to scalp it's actually
13:19quite a good environment if you can stick to like one or two trades a day
13:26moving on to like zooming out a bit and looking at what happened over the last couple of years
13:34so in 2021 uh so here we have 2021 on the top left chart then 2022 in the top right chart and then
13:43in the bottom charts we have 2023 on the left and 2024 currently still developing of course on the
13:51right so let's start with 21 in the top left chart um so that's the distribution of the daily range in
14:01points so the distribution chart just shows you uh the frequency of each bucket and so each bucket
14:08represents like a specific daily range so we can see that the most common one in 2021 was around 200
14:15points which happened around 75 times and then between roughly like 50 and 200 points it happened like 55
14:26times plus like 30 times more and so we have this clearest threshold that is showing that you know 200
14:34points is the most common one is the most common one and then you kind of have like decreasing odds
14:39for like 300 points 350 400 for 450 500 and so on but we still had a couple of days at like 700 points
14:48600 points 500 points which was good volatility if you remember 2021 on nq
14:57uh that was obviously right before the bear market of 2022 uh that was obviously right before the bear market of 2022
15:03so 2021 we were mostly like grinding up for a good um a good chunk of the year basically from like covid
15:15so march 2020 to uh october november 2021 if i remember correctly like we've been grinding up the whole time
15:27and when we grind up vix is low and the ranges are small and nq was trading in 2021 around like
15:3513 000 14 000 15 000 closing there at like 16 000 it's like 200 points like is nothing like too crazy
15:47compared to that valuation but we'll see that in percentage view after
15:51and then i'm not going to go to 2022 yet but i'll jump to 2023 where once again the most common daily
16:01range was uh 200 points so i guess people remember more easily 2023 because that was last year
16:09we started the year at like 10 000 and we ended it at like 17 uh 17 000 so the daily range was on the
16:20the most common one was 200 250 points basically these two buckets here
16:26so it's good it's nice this year is kind of the same the most common one if you look at the bottom
16:34right chart is like 200 points like from 187 points to 226 points here that's the most common one but now
16:42let's look at 2022 because 2022 the most common one by far is from 240 points to 324 points
16:56and this one happened 72 times which is kind of crazy because let's say you have like 220 days uh on
17:05of trading days in the year like one day out of three basically was a range of like 300 points
17:14300 points knowing that nq was uh trading on average during the year at like 13 000 points so
17:22it's like three percent like two and a half percent sorry uh so that's that's kind of high and then okay
17:30you have a bit here in this bucket from like 150 points to 240 points with a total occurrence of
17:3838 39 sorry but the vast majority is on the right side of the curve so it's 400 points 450 points 500 600
17:49points so in 2022 the distribution was very much skewed toward the right side of the of the tail
17:59of the curve sorry and we see this heavy tail with a few days aka four days with a daily range between
18:06866 points and almost a thousand points which is kind of crazy when you think about it like for an asset
18:14that is trading on average during that you're at 13 000 points we're talking like seven to eight percent
18:21daily range uh in this specific instance and even these ones at like 800 points and here like 700 points
18:30even here at 600 points we have like at least like 20 to 25 days where the range was above 600 points
18:40when we compare it to 2024 the largest range on one day was basically like 450 points uh which is extremely
18:54small and if we project the current 2024 numbers by the end of the year we will obviously never reach
19:02the distributions that we had in 2022
19:06and so that's why you know bear market is where you can make a lot of money because the opportunities
19:16are everywhere and here you have the the proof by the numbers looking at the distribution of the daily
19:24ranges compared to bull market like 2021 2023 and currently 2024
19:31where the daily ranges are more like around 200 points compared to like an average here of like
19:37around 300 points so this is in points but let's look at this in terms of percentage
19:44so for 2021 like the average daily range on nq is like one percent in 2023 it's one percent as well
19:54slightly below slightly below actually in 2024 the biggest one is 0.85 percent so that's the lowest we had
20:06in almost the last decade
20:10and then in 2020 uh in 2022 so we have a lot here at 0.9 1.1 1.4
20:21uh and then decreasing but like all of this basically is uh slightly um like bigger than one percent but
20:31the most important thing is that okay we have quite a big bucket here at like 0.9 percent but everything
20:39is on the right of this distribution whereas in 2023 and 21 the biggest trunk is on the left
20:48which means that we had a lot of days with extremely low volatility we're talking in 2021 of like 0.3
20:55daily range so right now it would be the current of like 60 points on nq
20:59and if you look at the chart last first day the daily range was 90 points and everyone was uh saying
21:08it's very slow they imagine instead of 90 points that would be 60 points so even even worse and this was
21:16the case like like during like 48 days in 2021 when the daily range was around like 0.5 percent
21:26and so the conditions that we had in the last three weeks can very much continue for an extensive period
21:33of time as the chart is suggesting suggesting for 2021 and 23 and that's why in january when i created
21:42that discord i mentioned the fact that until we don't break any swing low on the daily chart
21:48there is no need to get too much excited about intraday volatility and favor longs because that's just
21:55what my work is showing over almost two decades of data that i have
22:05so for the second part of the presentation i wanted to dive in a bit into the different
22:12volatility based on the day of the week so there's a lot of people that are saying that
22:17you know the volatility is friday on fridays that's why we have trend days uh first of all historically
22:25it's absolutely wrong uh in at least in terms of the volatility so over the last six years if we
22:35look at the numbers between mondays tuesdays wednesdays first days and fridays we can see that the median
22:42uh daily range in terms of percentage is 0.89 on mondays and 0.95 on fridays and wednesday is 0.98
22:57such as thursday and and tuesdays are 0.93 so the first thing is that it's all the same it's literally the same
23:05like we're talking a difference of like 0.6 0.06 sorry um which is extremely small like six percent right
23:17now on a daily range of 175 points is gonna be nine points so if a difference of range of nine points
23:28make a difference for you between the monday and the friday uh like probably trading is uh not the best
23:37discipline for you so this is exactly the same like the median which is the middle gray
23:45bar that you can see in this box plot for each day is yeah stable across the days between 2018 and 2024
23:56then it doesn't mean that there are no trends since 2018 but it means that overall it's kind of the same
24:05and the box plot how do you read it is that 50 of the values
24:11are inside the box that you can see that is colored in blue for mondays orange for tuesdays and so on
24:20so most of the time it's kind of well centered around the median so in that case again around like the
24:2895 percent mark except tuesdays that seem to be a bit more skewed towards high
24:36um daily distribution uh daily range sorry so the first thing is that the myth around friday is more
24:47volatile it's just not true historically okay between 2018 and 2024. these are the same numbers
24:56and the sample is obviously significant because if we have 250 days
25:02uh of trading per year and here i have 2018 19 20 21 22 and 23 so i have six years times 250 days
25:13so that's like 13 hundreds data points so it's definitely significant
25:20now let's look at 2024 because 2024 is uh very different so if we look at 2024
25:33now we see monday is looking absolutely terrible in terms of the median the median is 66 percent
25:40so what does it mean that one monday out of two so far this year the daily range is below 66 percent
25:47and one monday out of two it's above 66 percent so there's still quite a bunch that are around like
25:55one percent but the median is still extremely low however fridays the median is 1.13 which is extremely
26:05high it's almost doubled so this year i will agree that volatility has been better on average on fridays
26:14than than mondays and this chart is actually very interesting because during the previous years it
26:20wasn't the case it was more stable but this year we see a real shift between mondays and fridays
26:29tuesday is quite nice as well uh basically like all days have been good except uh mondays in in terms of
26:37median uh daily range but still we have a couple of days that are uh you know above the
26:44one percent mark and so something i like to to work on as well is to look at the evolution over the
26:57years that's the this type of graph i do it for all my analysis it's telling a lot of a lot of things
27:05most of the time and i invite you whenever you do some statistical work to give it a chance because it's
27:12really uh like a nice way to look at numbers and so on this chart i've i've been plotting the evolution
27:20since 2018 of the average daily range in terms of percentages for each day of the week and so if
27:29we start with the mondays in blue so we can see that we started in 2018 at around 1.1 percent and
27:39now of course we are at like the average 82 percent um which is kind of close from the median that we
27:47just saw at 66 percent so the median and the average are are not the same uh and we see that in 2020 it
27:55rose to above 1.1 but then we had this sharp decline in 2022. so basically since 2020 since covid
28:06you can see that shift in the volatility on mondays where it's been declining consistently so 2024 is
28:14not a surprise it was already the case in 23 and 22. so i would say that it's true that since 2022
28:21specifically the mondays had less opportunities but still it's good opportunity um because it's still
28:31like 0.6 percent 0.8 percent it's still representing like 60 to 100 points depending on uh nq's valuation
28:40and you know scalpers they like uh things that doesn't move too fast i guess for at least for some of
28:48them so um you know there's opportunities everywhere now if we look at tuesdays uh very different stories
29:00in terms of average it is today uh with the highest average right now 1.25 percent uh in 2024 so we see
29:12a big big jump compared to uh the previous years i don't know why it's just uh what the data is telling
29:19so you know it's definitely something i'm using for my own trading this year until something changes but
29:27it could very well be a new trend uh for the coming years so you know i'll keep monitoring that one
29:36when that wednesdays have been pretty stable since 2019 in 2018 it was quite high but then since then
29:44it's been around the one percent 1.05 mark first days have been increasing from 2018 to 2023 with a sharp
29:56decline so far in 2024 so first days are not what they used to be in terms of uh volatility
30:07and fridays have been increasing uh kind of consistently since 2018 nothing crazy but we gain like
30:150.2 percent of daily range since uh since that time so this gives quite a good picture basically how
30:25would i use that concretely for my trading in 2024 it's just that i know that mondays the range is
30:33smaller than expected uh so you know i'm i will be less greedy i'm gonna take profit quicker that's
30:41why you saw me each monday start with a smaller size as well on my trades to start the week because
30:48you know we don't really know what to expect the volatility has not been great so there's no point in
30:54like holding trades for like like 40 points 50 points when you know that over the last three
31:02years basically the volatility has not been here on mondays so that's something to take into account
31:10and then tuesday you know you have a bit more information and you know that it's been better this
31:15year so you can definitely increase your tech profit uh same for like you know then basically
31:24like tuesday to fridays you can have like slightly higher tech profits than on mondays uh but the key
31:30takeaway so far of like the data and the numbers in 2024 is that mondays uh it's it's fine i think at
31:39least for me to use like smaller leverage and just kind of take the vibes of the of the market during
31:47the first day of the week instead of like racing and you know not paying attention to to what the market
31:54is doing so if i summarize what we saw uh today is that the daily range if we look at all the numbers
32:06uh it's usually uh it's usually like around the one percent mark uh lately it used to be much more
32:13used to be like 1.5 to 2 percent in the past so is the market more efficient we have less players in
32:21the market i don't know but it's just the fact that over the last couple of years and especially during
32:27bull markets the intraday opportunities are less numerous and so that's why i invite you guys to
32:35take less trades right now because just the market conditions are not the best for that
32:45now something i like to do with the the daily range is let's say that we have a day where
32:52we do just 75 of the daily range or less like last first day when the daily range on nq was 92 points
33:01what happens the next day on average and so for that i went back into the last kind of
33:12six years of data and i've been looking each time we have you know a day where the daily range is below
33:2175 of the expected range based on the last five days of high end lows and
33:29on average the next day we have the daily range of 97 percent if we look at this chart so
33:40this is kind of a good information because you know that when there is a contraction of the volatility
33:45so typically doing like 75 percent or less of the expected daily range then you know that the next day
33:52on average again it's just an average it's not always true you can see here sometimes it's just like
33:570.3 sometimes it's uh three percent so you know it's like times 10 so it's an average on average
34:07the next day we do one percent so it's kind of good information especially because we see that this
34:12distribution is kind of uniformly distributed between like 0.5 and like 1.1.2 basically so we have a lot
34:26between especially like 0.7 and and 1.2 so again on average one percent which gives you uh plenty of
34:37opportunities during the intraday session to take position so for me typically when we have an extremely
34:46low volatility like last first day i'm expecting more moves during the next trading session
34:55so now let's see what happens on average the day after we have a very volatile day so very volatile day is
35:08going to be for me when the daily range is like basically at 125 percent of the expected daily range so let's say we're expecting
35:19uh 200 points daily range while instead we do uh like 25 percent more i don't like doing live mathematics i'm terrible so let's say 250 points
35:3350 points so if we're above 250 points for the day instead of 200 points then on average the next day
35:43we're supposed to have a hundred and eleven percent daily range
35:46so more volatility gives us more chances to have even more volatility for the day after
35:55and the lack of volatility gives us more chance of having more volatility the day after
36:00so basically if we have one of the extremes of very low volatility or very high volatility
36:08chances are the next day is going to be volatile on average so you can post that video and you know
36:16look at more in details into into the numbers to see that okay it's again once again on average so
36:23sometimes it's going to be 0.7 sometimes it's going to be 1.12 but still it's giving you a baseline and an
36:33understanding of what happened after this type of outliers day when the volatility is dry or present
36:43so typically last first day was not volatile so today is supposed to be more volatile
36:51now which is kind of funny because we literally opened um actually quite high we are already above
36:59adr plus so adr plus is at 553 for today and we are already trading at 583 so it's kind of uh kind of
37:09interesting uh especially for globex open that that is the most volatile globex open of the year i believe
37:16um i should i should i should check that but um yeah there's uh there's a lot of work to be done
37:24around around adr you can uh develop that approach to uh monthly ranges for example so for me that's
37:35something i use uh as well to monitor nq and es so in green here nq and in orange yes so we see the
37:43covid times where we had some monthly range above 30 percent which was absolutely insane and right now
37:49we are on like the five percent which is actually very low but keep in mind it has been lower than
37:56that between 2016 and 18 where it went as low as three percent for the whole month it's kind of crazy
38:05when you think like this is what we can do in like the overnight session during 2020 or 2022 bear market
38:16but here that was for the whole month and we had the case as well in 2012 in 2014 so we had like almost
38:24like uh like five six seven years where we had a few instances of extremely low volatility on the monthly
38:31chart which is again a characteristic of the bull market and that's why i'm always talking about the
38:41vx and that's my main way of uh looking at the market to get my percentage of long and shorts that i
38:49want to achieve intraday because just over again like here it's like 16 years of data
38:55it's just obvious that will not achieve anything by shorting the market all the time
39:07and so if we look at again a different different lens on the monthly to close that presentation so 2024
39:16here has an average of around six percent monthly range um it's obviously the lowest it has been
39:25since 2017. so we are in the lowest volatility environment of the last seven years so it's
39:33you know kind of important to note it's been declining basically since the bear market which makes sense
39:40uh it will come back at some point but we don't know when so the best thing to do is just as usual
39:48trade what we see and not have too much expectations so i think the biggest takeaway for you guys today is just
39:56when when you place a trade and you have like a target and of course a stop loss it has to be in line with the daily range because
40:05the daily range is very reliable and is there's always this pattern uh between the day of the week
40:15and of course the type of year we are in but it's very consistent and it's been the case the whole 2024
40:23i'm obviously doing it live during the streams with you in the mornings uh so i hope it's you know
40:29prove that it works well but here are the numbers anyway so feel free to spend as much time as you
40:36want like reviewing this uh this presentation and if you have any questions you can ask them
40:43in the chat please do not send me private message just send them in the chat so i can answer
40:48uh everyone at the same time uh once uh once you uh watch the video
41:04you
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