Average Daily Range Percentage (ADR%) is the single most underrated metric in retail trading. I'm going to show you what it is, how I calculate it, and why it should be on every chart you look at.
What is ADR%?
ADR% measures how much a stock moves on an average day, expressed as a percentage of its price.
A stock at $100 that moves $5 on an average day has an ADR% of 5%.
A stock at $100 that moves $15 on an average day has an ADR% of 15%.
Simple concept. Massive implications.
Why It Matters So Much
Here's the math: if you're risking 0.5% of your account per trade (the right amount), and a stock has an ADR% of 2%, your stop has to be tight — like $2 on a $100 stock. That means you're probably going to get stopped out by random noise. Your risk-reward ratio is terrible before you even enter.
Now flip it. A stock with 10% ADR on a $100 stock? You have room for a proper stop, the stock has real movement, and the risk-reward is worth it.
ADR% directly determines whether a trade is mathematically worth taking.
How I Use It
I run my ADR% indicator as a lower sub-panel on every chart. My minimum threshold for a trade is 5% ADR% in normal market conditions. When volatility is running hot, I'll look for 8%+.
The indicator plots the 20-day average, so you see the trend in volatility — is ADR% rising (stock waking up) or falling (stock getting choppy)?
Rising ADR% on a stock starting to break out = strong signal. That's the move.
Get the Indicator
My ADR% indicator for ThinkorSwim is available in the Tools section. One-click install, runs on any chart.