There are many trading strategies, but the higher high lower low method is the most effective one. You can trade using this strategy in any type of financial market like forex, stock, crypto.
What is Higher High and Lower Low
When peaks and troughs ascend in any given period in any particular currency, we call that currency is in an uptrend. Suppose In the GBPUSD pair, every time we find a new high, that high is higher than the previous high. So here, each time we get a higher high or HH.
When we find peaks are troughs descending, then that is a downtrend. For say, in the GBPUSD pair, we find new lows that are lower than the previous lows every time. So here, each time we are getting lower low or LL.
Don’t get confused! I will explain every detail of Higher High and Lower Low concepts and how you can use these concepts in day-to-day trading. Then all confusion will be removed!
Higher High Higher Low Pattern
Every time market creates new highs, that is a higher high. The retracements of that new high are Higher low. The market doesn’t rise sharply. We can call that when the impulsive move is greater than the corrective move, then there is a higher high. Every time a new high creates, we assume that the uptrend is still in power. And when retracements occur, the low of that retracements are called higher low.
Lower High Lower Low patterns
Every time market creates new lows, that is a lower low. The retracements of that new low are lower high. The market doesn’t fall sharply. Instead market moves in a zigzag way. When the impulsive move is greater than the corrective move, that is lower low. Every time a new low creates, we predict that the downtrend is still in power. The retracements or corrective move is called Lower high.
Look at the picture above how impulsive move is greater than the corrective move.
Higher High Lower Low Trading Strategy
Till now, I tried to make you understand the core definition and concepts. Now I will show you how you can make a profit using higher high lower low trading strategy.
Currency pair: We can take trades in any currency pair, but if we want the best result, we should stick to only trendy major pairs.
Like eurusd, gbpusd, usdcad, usdjpy, nzdusd, audusd, eurcad, gbpcad, euraud, gbpaud, eurjpy, cadjpy and some other trendy pairs.
Time frame: This strategy will best suit for 1-hour time frame. However, you can apply this strategy for 4 hours. But don’t trade with this strategy in a larger time frame than the 4 hours as you won’t get many trade setups in a larger time frame like daily or weekly.
When to buy : Whenever the price breaks, the higher high we can place a buy set up. Remember, some traders place buy trade on higher low. But that is an aggressive trade. We don’t know whether the market will continue to uptrend or start downtrend from here, so placing a buy trade on a Higher low is like committing suicide. We won’t do that. We will wait for the market. Let it breaks the previous higher high. And then we become sure that bulls are still in power. So we will enter the market. As the odds are in our favour and we are trading with the trend, there is much chance that our trade will go in profit.
Just check at my picture below. Every time price breaks higher high market creates new higher high. So if we enter trade at these points then we could make huge profits.
Take profit/Stop loss: Place your stop loss below the Higher Low. Your target should be 1:1. If you place more than 1:1, then you are over-expecting this market.
When to sell: Whenever the price breaks the Lower low, we can place a sell trade. Remember, some traders place sell trade on lower high. But that is an aggressive trade. We don’t know whether the market will continue to a downtrend or start uptrend from here, so placing a sell trade on a lower high is like committing suicide. We won’t do that. We will wait for the market. Let it breaks the previous lower low. And then we become sure that bears are still in power. So we will enter the market. As the odds are in our favour and we are trading with the trend, there are many chances that our trade will be profitable.
Caution of Higher High Lower Low Trading Strategy
When you use this strategy, then for buy setup, never enter the trade if a recent higher high doesn’t break the previous higher high. If the recent higher low breaks the previous higher low, then stay away from the market. Assume that the trend is about to change. Sellers will take control.
For sell setup in Higher High Lower, Low Trading Strategy don’t enter the trade if recent lower low can’t break previous lower low. If the recent lower high breaks the previous lower high, then predict that the dominant trend will change soon. buyers will take control from sellers
