It can be used on any time frame.
I use it on the . I note the daily figure, and that lets me know how far the price tends to move during a typical day (no gaps included).
If using on another time frame other than the daily, then it is an intrabar calculation, not intraday.
Apply a moving average to it to see the average intraday movement after the open when using a .
The IR% of a 1-minute chart tells you the price range of that one-minute price bar, and a weekly chart will show the price range of each weekly price bar.
It only measures high to low versus the candle's open price. It does not include gaps between candles, which makes it different than the ATR. ATR is more useful for swing trading, where the trader may be holding through gaps in price, and thus wants to factor them in.
The IR% is useful for day traders because it shows how much a stock tends to move during the day (intraday range), when using a . ATR is not as effective for this because it includes gaps, which day traders can't generally capitalize on.
If the IR% is fluctuating between 5% and 10% over the last 50 days or so (on the ), day traders know that AFTER the open, the price is likely to move 5% to 10% from high point to low point. This can help with establishing profit targets, seeking out stocks that tend to move a lot within the day, or avoid these types of stocks if they are undesirable to you. Seek out low IR% stocks if you prefer lower movement during your selected time frame.
A stock may have an ATR% of 5% but ATR doesn't tell us if that movement occurred after the open or includes a gap. Some stocks are prone to gaps. They may gap 4% most days, and then only move 1% during the day. This will still be a 5% ATR%, but most of that movement ISN'T capturable each day. The IR% for this stock would only be 1%, not 5% like the ATR suggests.
I developed this because I like day trading volatile stocks, and I wanted a measure that ONLY includes movement during the day, and doesn't include price gaps in the calculation. Because as a day trader, gaps don't matter to me. I can only make money on what happens during the day, after the open.
It is similar to another indicator called Average Day Range (ADR). Although most ADR calculations are already calculated as an average (so I don't see each individual value) or plots things on the chart. This may be useful for some people, but I wanted to see the data on each price bar, have the option to add a moving average or not, and not have anything plotted on the price chart. It also nice to be able to flip from % to $ dollar movement if desired.
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