What Is a Higher Low?
A higher low is when the price of a cryptocurrency closes at a level that is higher than the close of the previous day. For example, a cryptocurrency may close with a 2% loss on one day but higher than the close of the previous day. This would be considered a higher low since the losing day did not reach the previous day's low. A lower high can be indicative of a rising trend and give traders a reason to enter long positions.
Is a Higher Low Bullish?
A higher low can be bullish but is not a definite bullish signal. For instance, if a higher low is followed by a lower high, the price may be simply trading sideways or could even reverse to bearish action if it is followed by a new lower low. In this case, traders would be either hedging their positions or waiting for a better signal from the market.
On the other hand, if a higher low is followed by a higher high, this would most likely indicate a bullish trend.
How Do You Trade a Higher Low?
Trading a higher low can be challenging. It can be interpreted in different ways. If the price is in an uptrend, a higher low is a bullish sign if it is followed by a higher high. In that case, traders would enter long positions. If it is followed by a lower high, that may signal exhaustion, and the price could be entering a distribution phase.
However, if the price is not following an uptrend, a higher low can be difficult to trade. In a downtrend, it may signal the end of the selling pressure and the start of consolidation. Alternatively, it could also be the start of a rally that does not result in a new pattern being established.
Traders may want to consider other trading indicators when trading a higher low, such as the RSI and moving averages, to get more information about the market phase. Furthermore, external factors, like macroeconomic news or token-specific information, often have a significant influence on the price and can reset chart patterns.
Thus, traders need to be familiar with the interpretation of all signals and not solely rely on technical analysis.
Higher lows can be straightforward to trade if the price is in an uptrend but quite challenging if not. Experienced traders can identify whether a higher low indicates a continuation of the uptrend.
