Calculating Market Daily Range
One of the strategies commonly used by forex traders is to take advantage of the daily average range. Many argue that if the price has moved and reached its daily range then it is time to open a position. This means that if the price moves up and has reached the daily average range, it's time to sell, and vice versa.
Some opinions state that it is not safe if the daily average range is used as a reference for opening positions because traders can only get information, at least an estimate, how much price volatility is on that day. Traders can't tell how many pips the price will actually go up or down. Price movements can often be strongly influenced by fundamental factors. That is, even though the trader knows that the daily average range is for example 1000 pips, but if later the country's central bank announces that the trader will cut interest rates, the market may move more than 1000 pips.
It is best to avoid using this information to open positions. Even if a trader wants to do that, it should really be considered carefully. Also make sure the trader has a strategy that can really anticipate changes in the direction of price movements.
In this way, traders will still be able to maintain positions and re-analyze market reactions when prices reach their daily average range. If the price movement continues, the trader can maintain the trader's position.
On the other hand, if there are signs that the market is getting saturated, then the trader can predict that the momentum of price movement has started to decline and that might be the right time to close the position. This strategy will allow traders to secure the profits that have been obtained from transactions that traders have made. But remember that this method should be part of the trader's overall trading strategy. Likewise, if it turns out that the trader's trading conditions experience a loss. If the price has moved beyond its daily average range, there is a possibility that the market will actually reverse direction against the position the trader took.
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