ES and NQ Average Daily Range: How to Measure It and Size Trades With It

A stop that's too tight gets run by normal noise, and a target that's too wide never fills. Average daily range is the quick check that tells you whether your trade plan fits the market you're actually in. You don't need a published table to use it. You need to measure it yourself, convert it to dollars, and compare it with your plan.

Why not rely on a published range table

Many articles hand you a table like 'ES 25 to 45 points on normal days.' Ranges shift with the volatility regime, the contract's price level, which hours you measure, and the period you average. A number from someone else's sample can be stale or measured differently from yours. Measure your own, and refresh it often.

How to measure it

Average True Range (ATR) is a rolling average of true range, where true range is the largest of high minus low, high minus the prior close, and prior close minus low. It includes gaps, which a plain high-minus-low doesn't. Most platforms have a 14-period ATR on daily bars. Three points to be careful about:

• Session definition. A daily bar built from the full Globex session includes after-hours travel. A bar built from the regular session (9:30 am to 4:00 pm ET cash hours) doesn't. They give different numbers, so use one consistently and label it.
• Front month. Use the current front-month contract or a properly rolled series. A bad roll creates fake gaps that inflate ATR.
• Look-back. A 14-day ATR reacts slowly to a new volatility regime. Compare it with a shorter window, like 5 days, to see whether conditions are shifting.

Convert points to dollars

ES is $50 per point and NQ is $20 per point. MES is $5 and MNQ is $2. Here is a hypothetical example using ATR readings I made up for illustration:

That conversion is what makes ATR useful. If your daily loss limit is $500 and one NQ contract moves $3,600 on an average day, a normal day can hit your limit on size alone.

Using ATR to check a stop and a target

ATR doesn't pick your stop. The stop belongs at the price where the trade idea is wrong. ATR just tells you whether that spot is realistic. Say your ES ATR is 45 points and your setup needs a 3-point stop. That's about 7% of a typical day, so ordinary noise may run you out before the idea has a chance. If the same setup needs a 12-point stop, it's about 27% of a typical day, and you must size down to keep dollar risk the same. In both cases you adjust contracts, not the stop's logic.

For targets, express the distance as a share of ATR. A 20-point target on a 45-point ATR is about 44% of an average day. Possible, but check whether your past trades reached targets of that size in similar conditions. Log the share of ATR for each target and see what actually filled.

A regime check you can test

Compare the current ATR with its own recent history instead of with a generic table. When the 5-day ATR is well above the 14-day, volatility is rising, and you may want smaller size or wider stops with fewer contracts. When it's well below, expect smaller moves and recheck whether your target is realistic. I'd call these working rules to test, not a validated model. Record the ATR regime with each trade and see whether results differ.

Overnight range as context

A pre-open habit: note the overnight high and low, and compare that range with the 14-day ATR. If a large share of the typical range has already printed, you might expect less room left in the cash session, and the opposite if the overnight was quiet. That's a heuristic. I haven't verified it, so test it against your own data before leaning on it. This also fits with KPL trading, where reference levels come from the regular-session opening print and can't be completed before the open. ATR gives the size context around them.

Putting it into a plan

1. Record the current 14-day and 5-day ATR in points and dollars for the contract you trade.
2. Write your planned stop and target as points and as a share of ATR.
3. Size from the stop: contracts = risk dollars divided by (stop points times point value).
4. After 30 or more trades, compare filled targets with the ATR share you planned.

You can run expectancy math on those logged results with the edge calculator. Remember that stops can slip, so the dollar risk you plan is a minimum.