If an instrument averages a 2 percent daily range, a scalper targeting 1.5 percent is asking for most of a typical day's movement in one trade. Knowing the number keeps targets realistic.
Intraday traders also use it as a rough exhaustion guide: once a session has already travelled well beyond its average range, further continuation in the same direction has historically been less common, though this varies hugely by instrument and by whether news is driving the move.
Unlike true-range it ignores gaps, so on instruments that gap often it understates real movement. And like all averages it describes the typical day, which is precisely the day on which nothing interesting happens.
Related: true-range, atr, volatility-expansion, opening-range, take-profit