What Is The High-Low Indicator & How To Trade With It

High Low Indicator

The High-Low indicator defines the lowest and the highest price in a specific timeframe. If the indicator is positive and rising, it’s a bullish signal. And, if it is negative and falling, it’s a bearish signal. The High-Low indicator can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.

What is the High-Low indicator?

The High-Low indicator helps traders in finding the highest and the lowest price on a predetermined timeframe. With this, the indicator can help confirm the prevailing trend. Also, the highs and low are often the support and resistance levels.

The indicator calculates a 10-day moving average of the record high percentage. Then, it divides new highs by new highs plus new lows. The final calculation is:

Record High Percentage = New Highs / New Highs + New Lows x 100

Traders use moving averages along with the High-Low to try and observe signals in line with the overall trend.

High-Low indicator on a chart
High-Low indicator on a chart

The chart above marks the highest and the lowest point in a given timeframe. The red line signifies the lowest points, while the green line symbolizes the highest points.

One of the advantages of the High-Low indicator is that it predicts highs and lows automatically. Looking at these points manually can be time-consuming. By finding highs and lows, traders can easily draw entry and exit points.

Some traders confuse the High-Low indicator with the Hi-lo oscillator. The Hi-lo oscillator is a part of the Gann series, which describes highs and lows of previous periods.

A disadvantage of the High-Low indicator is that it may not be able to spot the most important high and low values as a trained human eye may be able to.

How to use the High-Low indicator?

The High-Low indicator can be used with price action strategies. Traders spot high and lows and execute trades based on the analysis.

The High-Low indicator can also be used alongside technical and fundemental market analysis as further confirmation.

It’s essential to note that traders often use the High-Low indicator on the daily charts. This way, when traders move to smaller timeframes like 1 hour or 30 minutes, the High-Low displays exact entry and exit points. The High-Low can be applied on longer-timeframes in conjunction with the 20-day moving averages. When applied individually, the High-Low indicator can produce false signals.

One of these price-action strategies include if the price of a currency pair moves past the previous day’s highs or lows, the pair will continue to move in the breakout direction. This way the indicator can be used as a breakout trading strategy. On the other hand, the High-Low indicator levels may act support and resistance, in which instance price could reverse. This way the indicator can be used as a reversal trading strategy.

In forex, on each timeframe, support and resistance levels represent the highest highs and the lowest lows of a given timeframe. When the price moves past the support and resistance levels, there is a chance of a breakout. With the high-Low indicator’s help, traders could look to buy at the lowest current value and sell it at the highest present value.

High-Low indicator trading strategy

As mentioned above, the High-Low indicator can be used on any timeframe. On shorter timeframes, things can happen in mere milliseconds. Traders may look to implement forex scalping or day-trading strategies.

On forex charts, the highest highs and the lowest lows are already present in support and resistance levels. With the help of the High-Low indicator, traders can get an extra filter for their trading strategy.

High-Low indicator buy strategy

  • Locate the lowest point on the chart.
  • Wait for the price bar to go bullish before entering.
  • Enter the trade above the lowest point.
  • Place a stop-loss near the recent low.
  • Exit the trade when the high point is approaching.
High-Low indicator buy trade setup
High-Low indicator buy trade setup

High-Low indicator sell strategy

  • Find out the highest point on the chart.
  • Wait for the price bar to go bearish before entering.
  • Enter the trade below the highest point.
  • Place a stop-loss near the recent high.
  • Exit the trade when the price is nearing the low point.
High-Low indicator sell trade setup
High-Low indicator sell trade setup

High-Low indicator conclusion

The high-low is a technical indicator for finding the highest and the lowest point on a given timeframe. With the observance of highs and lows, a trader can try to anticipate potential entry and exit points into the market.