High-Low Method
Using the highest and lowest prices over a given period to determine trading range and potential breakout levels.
The high-low method uses the highest high and lowest low of a period to define a trading range. Breaks beyond the range signal continuation or reversal, and the width gauges volatility.
The high-low method is a straightforward technical approach that uses the highest high and lowest low over a defined period to establish a trading range. Traders use these levels to identify breakout points, set stop-losses, and gauge volatility. The range width reveals how much a market has moved, while breaks above the high or below the low signal trend continuation or reversal.
How It Works
- Identify the highest and lowest prices over a chosen period (previous day, week, month)
- These levels form a range that acts as a framework for the current session
- Narrow ranges suggest consolidation and a potential breakout; wide ranges suggest an active trend
- The method is used in Donchian Channels, which plot the highest high and lowest low over a rolling period
Trading Tips
Mark the previous day's high and low on your chart at the start of each session
A breakout beyond the weekly high or low often signals a trend move
Use the average daily range to set realistic profit targets
Related Terms
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