What is Higher High Lower Low Strategy in Trading?

What is Higher High Lower Low Strategy in Trading?

Understanding What is Higher High Lower Low Strategy in Trading: While investing in the stock market, it is common for individuals to notice securities making highs and lows. But did you know that these highs and lows can be used to identify trends in the market?

In this article, we will go through what is higher high higher low in trading which will help us understand the trends in the market.

What are highs and lows in trading?

Before understanding what is Higher high lower low trading strategy, we have to first understand what are highs and lows in the market.

Highs in trading refer to the highest price security made and a low in trading refers to the lowest price security made.

The highs and lows of the price of the security are considered based on the time frame selected by an individual.

These highs and lows can be used in variations that form a pattern that can be used to identify the trend in the market. Let us move further in this article to understand these patterns.

What is Higher High Lower Low Trading Strategy?

Higher highs and lower lows are the formations of a pattern in the price of the securities that help us identify the trend in the market. Individuals can use these candle patterns and understand whether the market is on the uptrend or on the downtrend.

Higher highs and higher lows are the basic patterns used by individuals to identify the uptrend in the market. Lets us now understand these patterns to identify the uptrends in the market.

Higher high: The security is said to be forming a higher high when its price closes above the highs it had made in the previous sessions. This gives the individual the confidence that the price will likely rise in the future.

Higher low: Higher lows are formed when the price of the security closes at a lower price but sustains above the previous lows in the market. This gives the individual an assurance that the uptrend is going to sustain.

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Trading using Higher high and Higher low formation

Trading using Higher high and Higher low formation

When you identify this trend, you can buy the security when the price of the security makes a higher low and sell when the price of the security makes a new higher high. You can repeat this process until the trend is exhausted, after which you can book your profits.

While trading using this trend, the support level for the price of the security should be the previous higher low the security had made. If the price goes below this level you have to execute a stop-loss on your position.

Here is a live example where the price of the share made higher highs and lower lows.

price of the share made higher highs and lower lows

Individuals can identify the downtrends in the price of the security in a very similar manner using the lower low and lower high pattern:

Lower low: When the price of the security closes at a lower price than it did in the previous sessions, it can be referred to as a lower low. This pattern gives the individual the confidence that the price of the securities can dip further in the future.

Lower high: Lower highs are formed when the price of the security closes higher for the day but sustains below the previous high of the market. This gives the individuals an indication that the upper trend is dipping the market and the price of the security can likely decline in the future.

Trading using lower low and lower highs

Trading using lower low and lower highs

When you identify this trend, you can short (sell) the security when the price of the security makes a lower high and buy when the price of the security makes a new lower. You can repeat this process until the trend is exhausted.

While using a higher high lower low trading strategy, the support level for the price of the security should be the previous lower high the security had made. If the price goes above this level you have to execute a stop-loss on your position.

Here is a live example where the price of the share made lower lows and lower highs.

price of the share made lower lows and lower highs

Thus these high and low patterns help the individuals identify the uptrend or the downtrend in the price of the security. This helps them to take positions in the market based on different scenarios.

Also Read: How To Book Profit In Trading And Investing? Things You Need To Know!

In Closing

In this article, we understood What is Higher High Lower Low Strategy in Trading is and to take trades using higher highs and higher lows.

Individuals can identify the trends in the market by using both higher highs and higher lows, as well as lower highs and lower lows which can help them implement more effective strategies to enter and exit the market.

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