If you cannot understand what lower highs and lower lows are, then you are at a serious disadvantage.
These are common signs from the market structure that you should know.
In this article, I’ll explain what they are and how you can take advantage of them.
After this, you’ll see how powerful they can be.
What Does Lower Highs Mean?
“Lower highs” refers to a bearish trend in which the price of a currency pair creates a new high, that is lower than the previous – thus a lower high. This is typically seen as a negative indicator, as it shows that the currency is losing momentum and that demand for it is weakening.
To identify lower highs in a chart, you would look for downward price movements that reach new high that appears lower than the previous lower high.
In other words, each new high should be lower than the previous high, and there should not be any upward price movements that break the previous high (this will break the market structure).
Lower highs can be used as a trading signal, as they suggest that the trend will likely continue in a downward direction.
Traders may look to sell a currency pair if they believe that it is experiencing lower highs, or they may set a stop-loss order at a level above the previous high in order to protect their profits if the trend were to reverse.
What Does Lower Lows
“Lower lows” refers to a bearish signal in which the price of a currency pair creates a new low, that is lower than the previous – thus a lower low. This is typically seen as a negative sign, as it demonstrates that the currency is losing strength and that demand for it is decreasing.
To identify lower lows in a chart, you would look for downward price movements that reach new lows without being preceded by a higher low.
In other words, each new low should be lower than the previous low, and there should not be any downward price movements that break the previous low.
Lower lows can be used as a trading signal, as they suggest that the trend will likely continue in a downward direction and traders may look for an opportunity to sell at these levels.
How Lower Highs & Lower Lows Create Bearish Trends
Lower highs and lower lows create bearish trends and are the clues in how the market is trading using market structure.
If a lower high is created, then a lower low is created afterwards, these essentially create a downward staircase of price movements to the downside as you can see in the image below:
It’s important to know this because lower lows can form in a downtrend too, these are called market structure breaks, which means there is a shift in the market balance.
How Do You Find Lower Highs and Lower Lows?
Finding lower highs and lower lows is extremely easy.
Here is a quick breakdown of how to find them:
1. Look at the chart and make sure you have either OHLC or Candlestick Patterns charts turned on (so you can see the highs and lows of the session).
2. Find the most recent high, then look left. Is the price lower than the other? If yes, that is the lower high of the current market structure. Mark it on the chart.
3. Find the most recent low, then look left. Is the price lower than the other? If yes, that is the lower low of the current market structure. Mark it on the chart.
That’s it, it really is that simple and a good habit to take not from.
You can use these areas of the markets to gauge true market interest in the asset. If the lower lows are getting lower and more aggressive, then there are plenty of market participants in the market to go lower.
Tools to Help You Find Lower Highs and Lower Lows
Although finding these market structure areas are easy enough, sometimes an indicator may help to make things easier. Here are a couple of tools from the most popular trading platforms that could help you out.
TradingView Higher High and Higher Lows Indicator
This is a free trading script you can add to your tradingview platform which shows the lower highs and lower lows.
This isn’t a bad resource if you are just learning.
MT4 Higher High and Higher Lows Indicator
There are not that many freely available MT4 indicators that I could see in my search without handing money over.
In all honesty, you don’t need them. You can find the higher highs and lows with your own two eyes just as easily.
What is higher lows and lowers lows?
Higher lows are what is created when the market is moving in an uptrend, showing that the market is rejecting to go lower than the previous low created. Whereas the lower lows are created when the market is moving downward, showing the market is willing to go lower than the previous low created – showing bearish strength.
Are lower highs bearish?
Lower highs are considered a bearish signal as it demonstrates that the bulls are unable to keep the price at the high, thus the market traded lower afterwards. Lower highs are found in bearish trends.
Is lower highs and lower lows bearish?
Yes, when the market is creating lower highs and lower lows this is a strong bearish indicator.
In conclusion, lower highs and lower lows are important technical market structure tools that traders and investors can use to identify the strength and direction of a market trend. They can be identified by looking for downward price movements that reach new highs or lows without being preceded by a lower low or high.
It is important for traders to understand and be able to identify lower highs and lower lows in order to make informed trading decisions and potentially profit from bearish market trends.